Factoring Versus Bank Loans

In today’s world, bank loans often have restrictions and requirements that are difficult for some businesses to meet. While in the past, businesses have turned to bank loans as a way to increase cash flow while waiting for invoices to be paid, restricted lending over the past 5 years has made the process much more difficult.


Many companies are turning to factoring AR as a viable alternative to short term business loans. Factoring your invoices allows you to access liquid cash without accruing debt. Factoring is increasingly more popular as businesses deal with slow payments or arrange extended terms with clients and begin to experience a shortage of cash while needing to keep the business running.

How Does Factoring Shape Up Against a Bank Loan?

Factoring and bank loans are very different, and factoring is typically the easier, faster option. Factoring is not a loan as you are essentially selling your invoices to a factoring company like Universal Funding. Bank loans will require the following, while factoring may not require:

  • Cash flow statements
  • Income tax records
  • Future financial plans
  • Complete financial statements
  • Personal credit

Bank loans are also regulated by the federal government and can take anywhere from 30-60 days to process and approve. This means cash availability is several months down the road. Factoring companies may want to look at profit and loss statements and tax returns for the business BUT the decision is not solely based on these factors. They will also look at the credit of your customers and their typical payment cycles to determine approval.

Factoring is not regulated by the government and only takes 3-5 business days to process. Your cash is available within a matter of hours on approval. There are no lengthy bank terms and the limits can vary as your company grows when you choose to sell your invoices to a factoring company.

A Simple Process

The process is simple. When you are holding onto invoices that aren’t paid that make it difficult to meet the obligations of your business, a factor company will buy your invoices and advance you a large percentage of what is due. Once the rest of the money is collected from your clients, you are given a second influx of cash to complete the transaction. In the meantime, you have the cash to keep your business running and the stress off your back.

Contact Us

At Universal Funding, we believe we can help you improve your cash flow and meet your obligations. Visit our rate form today to learn more about what we can do for your business.

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