Apr 22, 2021
As a complete net terms and credit management solution, Resolve Pay is often compared to factoring companies and invoice financing. But the truth is: we couldn’t be more different.
Yes, Resolve Pay can help you unlock cash flow while still being able to offer net terms to customers. But we’ve intentionally designed our service to be safer and cheaper than invoice factoring or business loans. And unlike factoring companies or typical lenders, we take on all of the risk so you can rest easy when a customer doesn’t pay.
If you’re looking for a way to grow your business with improved cash flow, more working capital, and risk-free net terms, here are eight reasons why Resolve Pay is better than invoice factoring.
1. Resolve eases capital in a sustainable way
Unlike factoring, Resolve improves cash flow in a way that supports your business growth holistically. Resolve becomes part of your team and your financial tooling, not a shady financing service you feel slightly embarrassed to be using. Resolve’s flexible advance payment offering, nested within AR workflows, will ease capital pressures while improving your processes. After the customer approval, their net terms invoices will be paid within one day. In fact, Resolve isn't just for advance paid invoices. Resolve takes care of all your invoicing, accounts receivables, and B2B payments needs. Learn more about how Resolve helps scale AR far beyond simple cash flow improvements.
Factoring services, on the other hand, require you to go through an invoice-by-invoice application process. Which means you’re forced to wait for a decision every time you want to know your approved advance rate, unlock upfront cash from from a net terms invoice, and receive your cash advance. And, that's all they do. Factoring won't help your business in any other way. You'll gain cash flow, but potentially at the expense of your reputation and relationships.
2. Resolve Pay assumes the risk of non-payment
If you want to extend net terms to customers without the risk, choose Resolve Pay.
Our financing is non-recourse, which means that we (Resolve Pay) are on the hook if a customer doesn’t pay or goes bust. Factoring works differently. With an invoice factoring service, your business is responsible for covering any outstanding customer debt.
We’ll take on the risk of non-payment, advance your business up to 90% of approved customer invoices within 1 day, and give your customers 30, 60, or 90 days to pay us—all for a fee that’s cheaper than credit card processing.
"I've been regularly seeing much larger orders with Resolve Pay than I would have otherwise seen without net terms as a payment option for invoices, a huge win for our wholesale business."
— Ray Gil, Account Executive, Hyperikon
3. Factoring fees are high
The average factoring fee is surprisingly high. Depending on the type of invoice factoring you use (e.g. recourse factoring, non-recourse factoring, accounts receivable factoring, full factoring), a factor will typically take 20-40% of the invoice amount. So if low rates are a priority, invoice factoring isn't a great choice.
Here’s what the fees would look like for a $1000 invoice with 30-day net terms:
- Resolve Pay’s fee (2.61%) = $26.10
- Factoring company fee (20%) = $200
Unlike factoring companies, Resolve Pay also gives you the option to choose how much you’re advanced on each invoice, which can further reduce your fees over time.
To see how this works, let’s use the same scenario. Say you have a $1,000 invoice but you only really want 50% of that invoice to be advanced to your business.
- Resolve Pay would only charge fees on the advanced amount ($500 x 2.61%) = $13.05
- A factoring company would still charge fees on the total invoice ($1000 x 20%) = $200
One final thing to keep in mind with factoring fees is that these numbers compound at the enterprise level. Imagine how much of the total invoice amount you'd miss out on if you factored a $250,000 invoice with a factoring service.
When you do the math, choosing Resolve Pay is a no-brainer.
4. Invoice factoring company fee structures are not transparent
With Resolve Pay, you never have to worry about hidden fees or surprise charges. Our fee structure is intentionally simple and transparent (we charge a flat-fee of 2.61% for 30-day net terms invoices with a 90% advance). And pricing is always available on our website.
On the flip side, factoring costs are hard to make sense of. Factoring company fee structures are typically complex. Advance rates are hugely varied. And factoring rates often include hidden fees and surprise additional fees. Some invoice factoring companies may include things like servicing fees, termination fees, money transfer fees, renewal fees, or even monthly minimums.
So even if it looks like an invoice factoring service could offer you a good deal before you sign up, it’s not always easy to calculate the total factoring costs you'll end up paying to a factoring company over time.
It's also important to remember that you’re dealing with a buyers market when you work with a factor. Expensive factoring rates also take advantage of the fact that invoice factoring is a one-off type transaction that companies only really use when they're having cash flow problems or in a bit of hot water. Resolve Pay doesn’t operate like that. We’re interested in ongoing relationships with our customers. So we offer lower rates and a sustainable and value-added solution that integrates seamlessly with your accounts receivable processes.
5. Factoring can damage your B2B relationships
When it’s time to collect a late payment on an unpaid invoice or an outstanding invoice, a factoring company will bombard your customers with automated email reminders until they pay. And if that doesn’t work, invoice factoring services often engage debt-collection-agency scare tactics to make your cough up.
It doesn't matter if you're running a small business, a startup, or a large enterprise. Any business owner will know how damaging these approaches can be to long-standing customer relationships.
Just like a factoring company, Resolve Pay will help your business collect late payments—it’s built into our pricing. But we prioritize gold-standard support for you and your customers. So when it’s time to follow up on an unpaid invoice, a late payment, or outstanding invoice, we don’t act like a collections agency. Our team works with you to figure out the best approach for your company and your customer.
"Resolve Pay allows our customers to purchase high volume and/or high quantity orders while utilizing credit terms. Most companies we work with do not have the funds upfront for a purchase, so Resolve Pay is beneficial."
— Kristin Nyce, Wholesale Account Manager, SimpleTire
6. Factoring is a huge red flag to your customers
There’s a stigma attached to invoice factoring. And it can rub off on your company, whether you're running a small business, a startup, or a large enterprise.
When a business turns to invoice factoring, it tells customers:
- My supplier has a cash-flow problem
- My supplier isn’t doing as well as I thought they were
- My supplier might be going out of business soon
Understandably, these are all red flags to your buyers. Business customers need to know that their supply chain is strong. If invoice factoring gives the impression that your company is “weaker,” or that it might be going out of business soon, customers are more likely to work with your competitors to reduce risk.
Resolve Pay brings none of these negative red flags with your customers, because Resolve Pay is a white-labelled experience that acts like your ‘credit team on tap’. Beyond financing, we take care of business credit checks, credit line decisioning, net terms invoicing, payment processing, and reminders.
From your customer's perspective, Resolve Pay is an improved payments portal where they can easily pay invoices to you. In fact, Resolve Pay gives your customers more ways to pay by accepting ACH, check, or transfer as payment methods.
And on the business side, your team benefits from an integrated accounts receivable platform that helps you manage every aspect of net terms like any Fortune 500 company.
7. Resolve Pay helps you increase B2B sales
Resolve Pay performs smart customer credit assessments in hours. And we share your customer’s credit results with you. With this information on hand, it's easier to understand each customer's creditworthiness and decide which customers to offer net terms to. But you can also use this data to drive sales and increase order sizes.
For example, let’s say one of your small business customers buys $10,000 worth of goods and Resolve Pay approves the customer for a total credit line of $100,000.
Next time that customer places an order, you don't need to worry about their creditworthiness because you can see their credit results and you know that they’re approved for an additional $90,000 in credit. So you can safely pitch a larger order size, knowing that you can extend net terms to the customer with Resolve Pay and get advanced up to 90% of the invoice value of that net terms invoice upfront.
Even the best factoring companies don’t share customer credit lines, credit results or credit scores, so you’re always left in the dark.
8. Resolve is your credit team on tap
Invoice factoring may be one of the oldest forms of business financing. But invoice factoring companies are still a one-trick pony. For an exorbitant fee, they help you access your cash flow faster. And that’s pretty much it. With Resolve Pay, you get so much more.
As a complete B2B credit management and net terms solution, Resolve Pay is a credit team on tap that you can use to drive sales and grow your business. We'll reduce your accounts receiveable staffing needs.
When you work with Resolve Pay, we partner with you to provide:
- Customer credit checks that take minutes, not weeks
30, 60, or 90-day net terms for customers (with no risk to you)
- Up to 90% advances on net terms invoices within 1 day
- Transparent flat-fee pricing that’s cheaper than credit card processing
- The option to choose how much to advance per invoice
- A payment portal that gives your customers more ways to pay (ACH, check, transfer)
- Customer credit profiles that help you drive sales
- Industry-leading customer service
- Seamless integrations with your accounting software and accounts receivable workflows
- Payment processing
- Payment reminders
- Collections (if needed)
Your customers pay you directly. You own your customer relationships. You control how much you're advanced on each invoice without committing to a long-term contract. There are no monthly minimums or hidden fees to worry about. And our team is always on hand to help with your business needs—accounting system connections, net terms migration, product training, and more.
All of this is included in our fees, which are cheaper than standard credit card pricing or business loans.
You don't need invoice factoring. You need Resolve Pay
If you’re dealing with cash-flow issues and looking for a fast funding option, invoice factoring can get your company out of hot water in the short term. But it can have a devastating impact on your business in the long run.
Resolve Pay is a better solution if you need to unlock cash flow faster, extend net terms to your customers, and drive growth.
Ready to find out how to improve your credit processes, up your accounts receivable game, and grow your business with risk-free net terms? We offer a free credit report and financial information as part of a free trial. Request a demo with our team to find out more.
