Watch this video to know more about an invoice advance loan. The video also explains the major benefits and drawbacks of this type of financing. What is an invoice advance loan, and how does it work? An invoice advance loan is a form of short-term financing in which a business takes on a loan against unpaid customer invoices. The unpaid invoices in this matter are the accounts receivables that are to be paid on a later date.
This mode of financing is ideal for business-to-business or when a company is cash tied. An invoice advance loan plan can also be effective when you need to pay short-term expenses or when you want to manage cash flow matters.
With an invoice advance loan, your invoices act as collateral. The interest charges can be higher, but it can be a great saver when you need quick money. You have the responsibility of collecting the payments on behalf of the lender. The lenders usually charge an interest percentage of 1% to 5% of the unpaid invoice value. It is easy to qualify for such loans because your invoices act as a backup.