Invoice Finance- Myths and Truths about Invoice Financing

Too many people completely avoid the world of invoice financing because they see it as a dangerous type of loan that is bad news for their business. While it can be dangerous when it is not used accordingly, invoice financing is actually very helpful to many different businesses. Here are some common myths and the truth behind them:

Invoice financing is too expensive.

In reality, this type of loan does come with fees, but they are much cheaper than down payments and finance charges that you would get from a typical bank loan. You won’t spend a fortune on these loans and they can be affordable to just about anyone.

Invoice financing isn’t legitimate lending.

Yes, it is. With an Invoice Finance, the company will basically ‘buy’ your outstanding invoices, and then they will pay you around 80% up front while waiting for the payments to come in before paying the rest of the transaction. This lending is not only legitimate, it is very effective for quick, short term loans.

Invoice financing is only for certain needs.

This, again, is false. You can use invoice financing to get money for all types of business needs. Whether you’re short on payroll or need help with production costs, you can keep your business going with an invoice financing loan. When you apply for the loan, the company will typically ask why you need it, but there is really no wrong answer here.

Invoice finance loans are just glorified cash advances.

This one isn’t a complete myth. While putting it in these terms makes the loan sound much less professional and appealing, it still kind of rings true. Instead of using your pay check or bank account as collateral, though, you’re using your unpaid invoices to get the money that you need. It is simple, effective, and a quick way to get money for your business when you need it most.

Finally: Invoice financing companies are scams.

This couldn’t be further from the truth. These companies are available in all sizes, big and small, and are there to help your business. They make money off of your need for instant cash, and they are able to do it without taking you to the cleaners. These companies are perfectly legitimate lenders who are able to provide you with the money that you need when you might not be able to get funding from anyone else.