Should You Seek Invoice Factoring or Venture Capital Financing?

Customers looking to pay as late as possible and ignoring the opportunity of paying early with a discount often lead to cash flow difficulty for suppliers, especially with smaller companies. Meeting with invoice factoring companies may be more effective than trying to arrange finance from a venture capital company.

What Do Venture Capitalists Require?

While managing your business, there are many occasions when a dramatic inflow of cash would help you take the best advantage of any financial opportunity presented to you. This may be to purchase goods, stock for sale, upgrade your property or acquire new vehicles at a vast discount.

Invoice factoring companies have the advantage of taking over your invoices and paying them to your bank account within one or two days, rather than having to wait several weeks or months for cash flow to arrive.

A venture capitalist will require a specific return on their investment at a precise date. Where you are not able to meet the return on their investment, you will need to seek alternative funding.

Your company may not meet the criteria required by venture capital financing, even though the immediate cash flow will boost your profits significantly.

The time taken to arrange finances with suitable invoice factoring companies will usually be much less compared to finding venture capitalist lenders, and the time it takes them to complete a deal.

When you use finance for a venture capital company, you will need to pay the money back eventually. By using factoring companies, the deal concludes when you are paid as the fee for arranging the transaction will have been taken before you receive your finances.

You may wish to compare the timescales, the fees and overall costs of advancing your cash flow by both methods. A comparison will help you make decisions about which is the best route to take.

As your business grows, it may be easier to achieve venture capital finance, but where cash flow problems persist, it is the factoring companies that are going to be more useful to your business finance over the longer term.

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