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FACTORING VS LINE OF CREDIT

Which Should I use?

Getting the right type of financing is one of the most important decisions that can make or break any business. Financing methods are not created equal and can have dramatic implications on your company’s cash flow, taxes, operations, and overall competitiveness. This is especially true for small and emerging businesses, where access to the right type of capital is essential to growth.

Factoring vs Line of Credit

Factoring

Invoice factoring (or accounts receivable financing) is one of the easiest financing sources to secure. In simple terms, factoring involves selling your company’s receivables to a factoring company in exchange for upfront cash, which you can use to pay your bills, make payroll, or reinvest in your business. Unlike debt, your company’s credit-worthiness is less important than the credit-worthiness of your customers, so factoring can be a good option for businesses that sell to well-established, stable businesses but might have long payment terms.

Factoring vs Line of Credit

Line of credit

A line of credit is a low cost financing solution offered by many financial institutions. It can be perfect for companies with solid assets, a track record of success, a steady cash flow, and predictable cash needs. However, many companies find it difficult to secure this type of financing because of more stringent financial requirements.

Differences at a glance

 

FACTORING

LINE OF CREDIT

SPEEDFaster Approval – Businesses can benefit from fast approvals with factoring, with approvals happening within days of application.Slower Process – A line of credit can take longer, with the process of application to approval lasting weeks.
CREDITCredit Flexibility – The financial provider focuses on the credit-worthiness of your customer, and does not require  an in-depth credit analysis of your company.Credit Matters – Banks may require an in-depth credit analysis of both the individual and business seeking the traditional commercial loan.
STRUCTUREGrowth Structure – A factoring facility will grow with you as your company grows. Limited Structure – A bank’s line of credit is based on a dollar limit. Funding beyond that limit can be prohibitive.

 

Questions?

Reach out to learn more about how factoring can benefit your business.

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To our Valued Clients

When you receive your November deposit statements, you will see a new more modern look. When we upgraded our statements, we also provided required compliance disclosures. The required compliance disclosures increased the size of the November statements causing increased file sizes and download times. We apologize for the inconvenience. Please reach out to your First Business Bank Relationship Manager if you have questions or if we can be of assistance.

To our Valued Clients

When you receive your November deposit statements, you will see a new more modern look. When we upgraded our statements, we also provided required compliance disclosures. The required compliance disclosures increased the size of the November statements causing increased file sizes and download times. We apologize for the inconvenience. Please reach out to your First Business Bank Relationship Manager if you have questions or if we can be of assistance.

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Access to our Remote Deposit Capture system is intermittently unavailable; users may not be able to access it at this time. We are working to restore access as possible. If you have questions, please contact us at:

  1. Wisconsin Region: 608-232-5938
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NOTICE

To protect clients and employees, we temporarily suspended courier service. For other deposit needs, please see your client email sent on 3/16/2020 for instructions regarding deposits at your local First Business Bank office.

To set up Mobile Banking, please contact our Treasury Management Support team at 608-232-5938. We will alert you when courier service is available again. Thank you.