I am often asked whether an invoice finance facility is cheaper than an overdraft facility. In short the answer is ‘no’.
An invoice finance facility is typically more expensive than an overdraft facility. This is because of the workload involved in administering an invoice finance facility.
However, it is worth considering the following points?
- Is an overdraft a genuine option? Is your bank willing to offer you an overdraft facility? If not then it is not worth trying to compare the cost as it is not a genuine option.
- What security do they require in order to offer you the overdraft? Do they want to secure the facility on your family home?
- Will the overdraft facility be flexible enough to support your growth plans? As your turnover grows so will your requirement for working capital. While an overdraft facility is static an invoice finance facility will grow as your sales grow.
If you have been offered an overdraft facility and you are happy with the security requirements and the size of the facility then it may well be your best option.
If as I suspect this is not the case it is important to explore your invoice finance options properly.
At Smart Factoring Quotes our aim is to help you make an informed decision. We explain in full your options so you can decide what is best for your business.
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