Invoice Financing vs. Business Loan: What’s Best for Companies?

Invoice financing, also commonly known as Receivables Financing or Factoring, is a powerful financial tool that enables businesses to convert outstanding invoices into immediate cash. This solution is especially beneficial for companies in Singapore, where long payment cycles and project-based revenue streams can create significant cash flow challenges.

What Is Invoice Financing?

Invoice financing allows a business to receive payments based on the value of its unpaid invoices. Instead of waiting 60, 90 or even 120 days for corporate customers (Buyer) to pay, companies (Seller) can sell or assign these invoices to a third-party  (Factor), which then advances up to 90% of the invoice value upfront. Once the Buyer pays for the invoice, the Factor will refund the remaining balance to the Seller.

How Invoice Financing Works

• The facility is approved by the Factor to the Seller.
• The Seller delivers goods or services to the Buyer.
• The Buyer acknowledges on delivery order or other supporting documents for the Seller to issue an invoice.
• The Seller submits the invoice to the Buyer and Factor. 
• Factors advance up to 90% (less fees) of the invoice value upfront, providing businesses with immediate working capital. 
• When the Buyer pays the invoice, the Factor will then refund the balance amount to the Seller. 

Differences Between Hubble Factoring and Business Loan

Invoice financing and business loan are two distinct funding options, each with unique advantages and drawbacks. Choosing the right solution depends on your company’s cash flow needs, credit profile, and growth plans.

Key Differences

Invoice Financing: When to Use

Invoice financing is ideal for companies that:

• Need quick and recurring access to working capital for payroll, purchase materials, or bridge any cash flow gaps.
• Have strong, reliable receivables and a solid customer base.
• May not qualify for business loans due to limited credit history or weaker financials.
• Since invoice financing is not a loan, it doesn't appear as debt on the company's balance sheet, preserving borrowing capacity

Advantages:

• Rapid funding, often within days.
• Flexible, as funding grows with your sales.
• Less reliance on your company’s credit score.

Disadvantages:

• More dependence on the creditworthiness of your buyers.
• Requirement to submit invoice and supporting documents.
• Receive partial payment upfront, with the balance paid upon buyer's settlement

Keep Your Cash Flowing Smoothly

Invoice financing offers speed and flexibility for companies needing immediate cash flow relief, especially those with strong receivables but less established credit. Business loans, in contrast, are more cost-effective for long-term investments and companies with solid credit profiles. 

The best choice depends on your business’s unique financial situation and strategic goals. We are here to understand your business requirements. With our expertise and innovative funding options, we can help you optimise your working capital and achieve your business goals. Contact us today and take your business to the next level with Hubble.Financial.