Lets compare and contrast Invoice Factoring vs Leasing for a business.
They are both different types of business finance and are used for different purposes. Therefore it is hard to compare the two. However we can look at what they both are and how they might be used.
What Is Factoring?
Invoice Factoring is a revolving credit facility used by businesses to raise cash from their unpaid customer invoices.
Banks and other alternative lenders will take charge over a businesses “debtor book” and make the cash available. This type of business finance is suitable for businesses that trade B2B and give their clients credit terms.
It can be used by new start up businesses and long established companies.
What Is Leasing?
Leasing is a long term credit agreement used by businesses to rent an asset over an agreed period. A lease can be used acquire cars, vans, machinery and other equipment with a large upfront outlay.
There are different types of leasing such as a “Finance Lease” and an “Operating Lease”. A Lease is a type of “Asset Finance“.
Leasing can also be used to raise capital by selling existing assets the business owns and the renting them back. This would be called a “Sale and Leaseback”.
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More Invoice Factoring FAQs
- What Is Debt Factoring In Business?
- Debt & Debtor Factoring Definition In Business
- What Are The Costs Of Factoring? How Much Does Factoring Cost?
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- Factoring vs Invoice Financing
- Are Factoring Fees Tax Deductible?
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- Is Factoring Considered Debt?
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