Resolve is often compared to factoring companies and invoice financing. But the truth is: we couldn’t be more different. Here are 8 reasons to avoid invoice factoring.
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. It’s 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 ‘quiet’ credit check on your customers before approving them a line of credit. Once a customer is approved, Resolve can then advance pay their net terms invoices (30, 60, 90 days) within 1 day. And not just one invoice, Resolve will advance pay multiple invoices from that customer until the customer’s credit limit is reached.
Wouldn’t you rather have a single credit check that unlocks an ongoing line of credit? This way you can decide to use Resolve’s advance pay at any time, with less red tape, and get payouts within 1 day. In addition, instead of hassling your customers to pay, Resolve acts as your trusted AR resource providing a smooth payments portal experience for your customers and customizable payment reminder options.
Most factoring services are not non-recourse - this means if your customer doesn’t pay their invoice you are ultimately on the hook. Ouch! Imagine if your largest customer went bust or couldn’t pay you. It might 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 ultimately doesn’t pay. This is also a good reason to trust our credit checking process - Resolve takes on the risk of non-payment, all while advancing up to 90% of approved customer invoices within 1 day.
The average factoring fee may seem reasonable, but it's the late fees that will get 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 the invoice amount. So if consistency and reliable low rates are a priority, invoice factoring isn't a great choice because of this.
Here’s what the fees would look like for a $1,000 invoice with 30-day net terms:
- Resolve Pay’s fee (2.61%) = $26.10
- 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 2.61%) = $13.05
- 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.
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.
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 2.61% 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 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.
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 will know how damaging these approaches can be to long-standing customer relationships.
Resolve will also help your business collect late payments. However, there is a large difference in how we go about this. Resolve prioritizes gold-standard support for you and your customers. So when it’s time to follow up on an unpaid invoice, a late payment, or an 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.
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 brings none of these negative red flags with your customers because Resolve is simply a part of your value-adding financial tools. From your customer's perspective, Resolve is an improved online payments portal where they can easily pay 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.
And on the business side, your team benefits from an integrated accounts receivable resource that helps you manage every aspect of net terms like a Fortune 500 company. Resolve makes life easier for your AR team by taking care of payment processing, payment reconciliation (QuickBooks Online), and payment reminders.
We hear many customers tell us ‘Resolve helped us enter new businesses and take on larger orders. This is because Resolve works with you to offer net terms as a payment option, all without impacting your cash flow. The reality is, larger customers can often demand the payment options (net terms) that they want, or they’ll take their business elsewhere. It’s not their problem if that demand will torpedo your cash flow for the next 2 months.
Next time you get a huge order, you 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 with Resolve, and get advanced up to 90% of the invoice within 1 day. Resolve gets new customers sorted fast too - we complete our ‘quiet’ credit check in minutes then we share your customer’s credit results with you. For trusted customers, Resolve’s credit lines can go up to 1 Million.
Next time a new customer places an order, you don't need to worry about their creditworthiness because you can see their Resolve credit results too. Even the best factoring companies don’t share customer credit lines, credit results, or credit scores, so you’re always left in the dark.
If you’re dealing with cash-flow issues and looking for a one-time financing option for a single invoice, then maybe factoring is the way to go. 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, you get so much more.
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 to reconcile.
When you work with Resolve, 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 cash flow risk to you)
- 90% advance payouts on net terms invoices within 1 day
- Comprehensive credit & AR dashboard to view all credit lines and advances
- Modern online payment portal that gives your customers more ways to pay
- Seamless integrations with QuickBooks Online and e-commerce checkout extensions
- Payment processing, payment reminders, and collections (if needed)
Resolve is undeniably the better solution if you need to unlock cash flow, extend net terms to your customers, and drive growth. Are you ready to find out how to improve your credit processes, up your accounts receivable game, and grow your business with risk-free net terms? Learn more about Resolve’s 14 day Free Trial.