Factoring vs Overdraft · SME cost comparator

Compare financing costs

Enter your operation's details to see the exact cost of each option and the potential saving.

Invoice amount (€)

Term (days)

Factoring rate (% per year)

Overdraft rate (% per year)

Factoring

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Bank overdraft

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Saving with factoring

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Full comparison

Beyond cost, there are important structural differences between the two products that should shape your decision.

Criterion	Factoring	Overdraft
Typical effective rate	2.5%–5% a year	7%–15% a year
Personal guarantees	Generally not required	Common for SMEs
Default risk	Transferred (non-recourse)	Stays with the company
Balance-sheet impact	Off-balance (non-recourse)	Increases liabilities
Limit grows with sales	Yes, automatically	Needs renegotiation
Approval time	24-48 hours (digital)	1–4 weeks
Collection service	Included (with the factor)	Not included

When factoring is the better choice

Factoring is not suited to every situation, but there is a set of scenarios where it clearly beats the overdraft.

Growing company

The factoring limit grows in proportion to your sales. The overdraft has a fixed ceiling that requires renegotiating with the bank.

Large or public-sector customers

Invoices on solid entities (the State, multinationals) get lower rates because the risk sits with the debtors, not with you.

You want protection from insolvencies

With non-recourse factoring, if the customer fails to pay due to insolvency, it is the factor that loses out, not your company.

One-off, fast need

Have a large invoice on 90-day terms and need the cash now? Factoring settles it in 24-48h, with no bank meetings.

Recourse vs non-recourse factoring

There are two main types of factoring, with different impacts on risk and cost:

Recourse factoring

If the customer (debtor) fails to pay, the default risk reverts to your company. It is cheaper (lower rate) because the factor takes on less risk. The invoice stays as an asset on the balance sheet.

Non-recourse factoring

The factor fully takes on the debtor's default risk. If the customer becomes insolvent, your company does not repay the advance. The invoice leaves the balance sheet (off-balance sheet), improving the financial ratios. It carries a slightly higher rate but includes credit insurance.

Advanta offers both types, with automatic risk-profile analysis of each debtor to present the most favourable option.

Frequently asked questions

What is the main difference between factoring and an overdraft?

Factoring means assigning specific invoices to a factor, who advances their value. An overdraft is a generic credit line linked to the current account; it can be used for any purpose, but it is much more expensive and increases the company's liabilities. Factoring is tied directly to the collections cycle and is therefore the most suitable product for funding working capital.

Does factoring show up on the company's balance sheet?

It depends on the type. With non-recourse factoring, the assigned invoices leave the assets (accounts receivable) without creating a matching liability, it is off-balance sheet, which improves the debt ratio. With recourse factoring, the invoices remain as an asset until settlement. The overdraft, by contrast, always appears as a callable liability, worsening the solvency indicators.

Can I use factoring even with an active overdraft line?

Yes. Many companies use both in parallel, factoring to fund specific receivables (cheaper), and the overdraft as a reserve for ad-hoc needs not tied to invoices. The ideal strategy is to maximise the use of factoring to reduce the average cost of funding and keep the overdraft as an emergency buffer.

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