The Difference Between Accounts Receivable Financing and Factoring

In order for you to keep your company in the business, it can be a good idea to think through your financing options every now and again. When your company runs into a problem with cash flow, for example, you need to know where to turn. There are a number of financial services aimed at helping businesses through these difficult periods. Of course, you may not have the first idea about whether or not you should opt for a service like factoring or a service like accounts receivable financing. Look at these suggestions to get a better idea of your options.


To get started, it can be a good idea to look at factoring. Essentially, this is a service that involves your unpaid invoices. When a client is delayed or negligent on payments, you can sell your invoices to a company that specializes in factoring. The company will provide you with a percentage of the value of the invoices, then go about the task of collecting the rest of what is owed. You will not take on any debt, as the money is an advance rather than a loan. This is a simple way to see the funds you require.

A/R Financing

Another similar choice to factoring is accounts receivable financing, which is also referred to as A/R financing. For the most part, this service is very closely related to factoring in most ways. The main difference between factoring and A/R financing is that the companies that provide A/R financing are able to offer their clients more favorable rates and terms. In order for you to know whether or not this service is one you can take advantage of for the future of your small business, now is the time to reach out to a company that provides the service and learn more.

The Benefits

The biggest benefit that comes along with either of these financing services is that you are not going into debt by exploring the option. Instead, you are simply receiving the money you are already owed. This can be a huge asset to business owners who are concerned about taking on more debt when they are already in tight financial predicaments. It can also be advantageous because you will no longer need to chase down the clients who owe you money, as the factoring establishment will take on this task.

Getting out of a tight financial spot can be tough for your small business. Look into services like accounts receivable financing and factoring to determine which is the best fit for your needs.

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