Invoice Finance vs Bank Loans: What’s the Better Choice?

Invoice finance is seeing a rise in popularity. In this blog, we compare the advantages of invoice finance, and the considerations for bank loans. If you're deciding which funding option to go for, this blog is for you!
Man signing loan agreement and being handed an envelope with cash.

For many years, traditional bank loans have been the go-to for business financing. However, the tides have been shifting in recent years. Asset-based lending methods like invoice finance are growing in popularity, as many SME owners are beginning to see the wealth of benefits invoice finance brings to the table.

As invoice finance becomes more popular, it’s natural to question which financing method better suits your business. In this blog, we hope to provide you with some clarity on the subject. Let’s dive in…

Understanding Invoice Finance

Did you know, the average business owner in the UK has to wait 31 days to get paid? This can be a huge hurdle for SMEs, who need cash on hand immediately to cover wages, supplies, and operational costs. With invoice finance, a lender will pay you up to 90% of the invoices value within 24 hours on issue. So, if you send out a £1,000 invoice, you’d get paid £900 in a day.

  1. Immediate Access to Cash: Instead of waiting for customer payments, you get immediate cash flow.
  2. Credit Rating Flexibility: It’s often available to businesses with less-than-perfect credit.
  3. Grows with Your Business: You can request a funding limit increase as your business grows.
  4. No Debt Accumulation: Unlike loans, invoice finance doesn’t add to your debt levels, keeping your balance sheet healthy.
  5. Meet Expenses On Time: Meet expenses without worrying about where the money’s coming from.

Traditional Bank Loans

A bank loan provides a lump sum of money upfront, which is repaid over time with interest. It’s the traditional route for many businesses and whilst it does offer stability, there are some considerations to bear in mind. In our current economic climate, the limitations of traditional loans are becoming more apparent.

  1. Lengthy Processes: The time from application to funding can be extensive, slowing your ability to act quickly.
  2. Rigid Structures: Fixed monthly payments don’t account for the ebb and flow of business.
  3. Stringent Requirements: Many SMEs are struggling to secure bank loans as they are too small or have an adverse credit history.

Making the Informed Choice

The decision between invoice finance and traditional loans depends on your specific needs. However, in an era where many businesses are being rejected by the banks, the flexibility and speed of invoice finance emerge as the more agile and accommodating choice.

If you have any questions you’d like to clarify, request a free call back with our team today. We’ll aim to get back to you within 24 hours of your request.

About Us

Apollo Business Finance is the UK’s fastest-growing independent invoice finance lender. We provide businesses of all shapes and sizes with the cash flow support they need to grow, regardless of credit history or past hurdles.

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