I have read a number of articles that seem to equivocate receivables factoring with a business loan or a method to finance growth. This may be true in certain larger corporate environments but the fact is that most companies utilize factoring simply to keep an adequate cash flow available.
When a company acquires a business loan, they present company assets as collateral for that loan. These assets are insurance for the lending organization that, should the company receiving the loan default for any reason, the lender can recoup the amount loaned by acquiring company assets.
When a company uses invoice factoring, it is a means of receiving what is essentially an advance on income that is anticipated anyway. It puts your own money in your hands faster. With a loan, it puts someone else’s money in your hands and you guarantee repayment.
I think that it can be somewhat misleading to represent revenues received from receivables factoring as the equivalent of a loan. While factoring does give you money to work with that you wouldn’t ordinarily have, it is still your money.
