Whenever I am reading about the advantage and disadvantages of invoice factoring, one of the first negatives mentioned is the expense. Of course, the alternative being considered is normally some sort of loan and the comparison is invoice factoring vs. a business loan.
Ozark Capital has published an article addressing this topic and the author makes a pretty good case for the advantages of factoring. But one of the premises that I find a bit disconcerting is that the author seems to take the position that a business loan is preferable to invoice factoring because he/she states that factoring is something to be strongly considered after a business owner has been turned down for a business loan. I would like to do a post in the near fiyure that compares the actual out-of-pocket costs for these two methods of financing.
One intriguing position in the article presents a scenario where it is actually a financial disadvantage to avoid invoice factoring. The author refers to this as “incremental profit analysis” and measures the cost of factoring vs. the financial opportunity missed by not factoring. Very good point!
