Compare financing costs
Enter your operation's details to see the exact cost of each option and the potential saving.
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, if non-recourse | Stays with the company |
| Balance-sheet impact | Can come off the balance sheet (non-recourse) | Increases liabilities |
| Limit grows with sales | Usually, with your sales | Needs renegotiation |
| Time to cash | 1-2 business days after approval | 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 soon? Factoring can pay it 1 to 2 business days after the funder approves, 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 can leave the balance sheet, improving the financial ratios. The rate is slightly higher because the factor covers that risk.
Offers on Advanta can be with or without recourse: the funder's offer says which, before you accept. Advanta analyses each debtor's risk profile to prepare the file for the funders.
Frequently asked questions
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