Receivable Invoice Financing

Both factoring and invoice financing entail a lender providing an advance, usually around 70% to 80%, of the outstanding invoice value to the borrower. The key distinction lies in the administration of receivables: in a factoring arrangement, the lender assumes control over receivables administration, whereas in invoice financing, borrowers may retain control over their receivables.

Invoice financing is well-suited for B2B (business-to-business) industries where credit terms are extended to buyers. Businesses that operate on a B2C (business-to-consumer) model or employ cash-on-delivery (COD) transactions would not find invoice financing as suitable, given its nature of being based on credit terms with business clients rather than immediate consumer transactions.

The typical interest rate for invoice financing falls within the range of 7% to 12% per annum. However, certain non-bank alternative lenders may offer invoice financing with interest rates ranging from 1% to 3% per month.