Apr 23, 2021
Resolve is often compared to factoring companies and invoice financing. But the truth is: we couldn’t be more different. If you're looking for an alternative to factoring, this guide is for you. Plus, we'll share 8 reasons why you should avoid invoice factoring.
1. Factoring is slow, invoice by invoice.
Working with a factoring service requires you to go through an invoice-by-invoice application process. This means you’re forced to wait for a decision every time you want to unlock cash flow from a single invoice. Also, factoring is very much a ‘one-off’ type of service that doesn’t care about your ongoing relationship with your customers.
Resolve is very different. We perform a one-time reliable, sophisticated, and fast ‘quiet’ business credit check on your customers before approving their line of credit. Once your customer is approved, Resolve can even advance pay their net terms invoice to you (30, 60, 90 days) within 1 day. And not just one invoice! Resolve will advance pay multiple invoices from your customer until that customer’s credit limit is reached. How's that for faster cash flow?
Wouldn’t you rather have a single credit check that unlocks an ongoing line of credit? This way, you have the ooption to use Resolve’s advance pay option at any time, with less red tape, and get cash payouts within 1 day. If that didn't sound good enough, instead of hassling your customers to pay you, Resolve acts as your trusted Accounts Receivable partner by providing a smooth B2B payments portal experience for your customers and customizable payment reminder options.
2. Factoring means customer non-payment is on you.
Most factoring services are not non-recourse. This means if your customer doesn’t pay their invoice, you are still ultimately on the hook. Ouch! Imagine if your largest customer went bust or couldn’t pay you. Factors don't care and the impact might even be enough to sink your business.
Again, here is where Resolve is superior to factoring. If you want to extend net terms to customers without the risk, choose Resolve. Our financing is non-recourse, which means that we (Resolve) are on the hook if your customer doesn’t pay, not you. This is also a good reason to trust our credit risk management system. That's how confident we are! Resolve takes on the risk of non-payment, all while advancing up to 90% of approved customer invoices within 1 day to you. Less risk, cash on demand. What's not to love?
3. Factoring fees are surprisingly high.
The average factoring fee may seem reasonable at first, but it's the hidden late fees that will shock you. These fees increase exponentially as soon as the invoice is even a few days late. Depending on the type of invoice factoring you use (e.g. recourse factoring, non-recourse factoring, accounts receivable factoring, full factoring), a factor could ultimately end up taking as much as 20-40% of your invoice amount! So if consistency and reliable low rates are a priority, invoice factoring isn't a great choice for you.
Here’s what the fees would look like for a $1,000 invoice with 30-day net terms:
- Resolve Pay’s fee (2.70%) = $27.00
- Factoring company fee (could end up being as high as 20%) = $200.00
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 2.70%) = $13.50
- A factoring company would still charge fees on the total invoice ($1000 x 20%) = $200.00
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. Factoring fee structures are not transparent.
Factoring company fee structures are typically complex. Advance rates are hugely varied. And factoring rates often include hidden fees and surprise additional fees 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.
Let’s compare this to Resolve - you’ll never have to worry about hidden fees or surprise charges. Our fee structure is intentionally simple and transparent (we charge a flat fee of 2.70% for 30-day net terms invoices with a 90% advance). And our pricing is displayed openly on our website.
It's also important to remember that you’re dealing with a buyer’s 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 doesn’t operate like that. We’re interested in building an ongoing positive relationship with you. So, not only do we offer lower rates with a sustainable and value-added solution that integrates seamlessly with your existing accounting and ecommerce solutions, we have a vested interest in the health and success of your business. You're not simply outsourcing your accounts receivables collections to Resolve, we are helping you improve and build positive and loyal relationships with your buyers for the long run.
5. Factoring can damage your customer 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 you cough up.
It doesn't matter if you're running a small business, a startup, or a large enterprise. Any business owner knows just how damaging these approaches can be to long-standing customer relationships.
Say no to aggressive collections. We do.
Resolve does not use aggressive collection tactics in any way even though we help your business collect payments. However, there is a large difference in how we do this versus traditional factoring companies. Resolve prioritizes gold-standard support for you and your customers. We even have the customer stories to prove it: we are rated 5/5 stars on third party review websites like Capterra and G2. When it’s time to follow up on an unpaid invoice, a late payment, or an outstanding invoice, Resolve acts like an integrated receivables solution, not an aggressive collections agency. Our team works with you to figure out the best approach for your company and your customer.
In fact, Tern Bicycles supports this by stating, "We are confident that Resolve is going to tret our customers right." Resolve's approach to managing your accounts receivables and payments is based on our dedication to providing excellent customer service and helping you build strong relationships with your customers.
6. Factoring is a huge red flag to your customers.
Let's be honest. There’s a stigma attached to invoice factoring. A negative stigma. And it can rub off on your company's reputation, whether you're running a small business, a startup, or a large enterprise.
When a business turns to invoice factoring, this is a signal to tell your customers:
- My supplier has a cash-flow problem.
- My vendor isn’t doing as well as I thought they were, I should look elsewhere
- My supplier might be going out of business soon. I should stop doing busienss with them.
Understandably, these are all red flags to your buyers. Business customers must know that their supply chain is strong. If invoice factoring gives the impression that your company is “weak,” or that it might be going out of business soon, customers are more likely to work with your competitors to reduce risk.
Working with Resolve brings none of these red flags with your customers. Resolve is simply seen as a part of your value-adding financial tools as a net terms solution. From your customer's perspective, Resolve is an online B2B payments portal where they can easily pay their invoices to you. In fact, Resolve Pay gives your customers more ways to pay by accepting ACH, wire transfers, check, or credit card as payment methods.
On the business side, your own team benefits from using an accounts receivables collections solution that helps you manage every aspect of net terms. It can even make you be presented like a larger Fortune 500 company when your payments and collections process is so seamless! Resolve makes life easier for your AR team by streamlining AR, taking care of payment processing, payment reconciliation (QuickBooks Online and NetSuite), and payment reminders.
7. Factoring won’t help you grow revenue.
Factoring doesn't help you grow your sales. But Resolve will. Many businesses and customers say that "Resolve helped us enter new businesses and take on larger orders."
In fact, Archipelago Lighting tripled their revenue with the help of Resolve!
Resolve works with you to offer net terms online as a payment option while offering you the option receive the cash up front. The reality is, larger customers can often demand payment terms that they want, or they’ll take their business elsewhere, giving you no choice but to offer them. Your customers don't care if their demand will negative impact your cash flow for the next 2 months - they just want their credit terms!
Next time you receive a huge order, don't need to worry about the 60 days net terms demand it comes with. Resolve means you can safely pitch a larger order size, knowing that you can extend net terms to the customer while receiving an advance of up to 90% of the invoice within just 1 day.
Resolve can get your new customers sorted fast too! We complete our ‘quiet’ credit check within one business before share your customer’s credit results with you. For trusted customers, Resolve’s credit lines can go up to $1 million!
The next time a new customer places an order, say yes and watch your sales grow. You don't need to worry about their creditworthiness because Resolve will run their credit results for you. Some factoring companies don’t even share customer credit lines, credit results, or credit scores, so you’re always left in the dark.
8. Why use factoring when there is Resolve?
Factoring used to be a popular option for many companies when there was no other choice. If you were dealing with cash-flow issues and looking for a one-time financing option for a single invoice, then factoring was the way to go.
Invoice factoring is one of the oldest forms of business financing, after all! But invoice factoring companies are still a one-trick pony and they charge exorbitant fees. It's now 2023 and there is a better way to access cash flow faster.
Resolve is so much more than factoring, it's net terms-as-a-service. As a complete B2B credit management and net terms solution, Resolve is like your credit team on tap helping to drive sales and grow your business. We'll reduce your accounts receivable staffing needs too by processing payments and syncing with QuickBooks Online (or other accounting systems) to reconcile your transactions.
When you work with Resolve, we partner with you to provide:
- Customer business credit checks that take minutes, not weeks. Imagine all the time you'll save!
- 30, 60, or 90-day net terms for customers (with no cash flow risk to you)
- Up to 90% advance cash payouts on net terms invoices within 1 day
- Comprehensive B2B credit & accounts receivables dashboard to view all credit lines and advances given to your customers
- Modern online B2B payments portal that gives your customers more ways to pay
- Seamless integrations with QuickBooks Online, Netsuite and other popular ecommerce checkout extensions
- Payment processing, payment reminders, and collections
If you want a factoring alternative, Resolve is undeniably the better solution to unlock cash flow, extend credit terms to your customers, and drive growth.
Are you ready to find out how to improve your credit processes, improve your accounts receivable game, get out of the collections rut, and grow your business with risk-free net terms? Learn more about Resolve’s 14 day Free Trial.
