If you’ve been experiencing cash flow problems at your business, chances are you’ve been doing a little research into your financing options. The fact that you’ve landed on our blog means that you’ve likely discovered there are several options available to your business, including account receivables financing and bill discounting.
If you’re wondering what the difference is between these two types of financing and which one represents the best option for your business, the experts at The Commercial Finance Group in Atlanta, are here to help.
How Does Bill Discounting Work?
Bill discounting is a short-term financing solution, a trait that it shares with factoring. However, this is where the similarities between the two end, though their differences can sometimes be very subtle.
Bill discounting describes a process in which a business will “sell” a bill that has not yet come to to a third party. In most cases, the price is less than the face value of the bill, hence the term “bill discounting.”
How Does Accounts Receivable Factoring Work?
While also a short-term finance solution, factoring describes a process in which a business sells unpaid invoices (debts) to a third party. Again, the debt is sold at a slight discount to the factoring company in exchange for immediate payment, and in most cases, the solution of a business’s cash flow problems.
Unlike bill discounting, through which the entire bill is paid when the transaction takes place, factoring advances part of the total bill amount to the original company, with the remaining amount being paid at time of bill settlement.
Learn more about how accounts receivable financing can be a tool to provide financial stability to your business. Contact The Commercial Finance Group today.
