Is Factoring a “Loan” Like a Bank?

Factoring is not a loan and there are many differences between getting a bank loan and utilizing factoring.

Banks lend money. Most of the time they require some form of collateral which can be challenging for small or new companies. Additionally, banks are limited (by regulation) to how much money they can advance a business owner (oftentimes between 30% – 50%). Lastly, bank “loans” show as a debt on the business owners books.

Factoring is not lending. It is the purchase of a receivable at a discount. There are no collateral requirements, no “debt” and Factors are not limited in the amount of money they can advance (usually up to 90% depending on the payer).