Apparel Invoice Factoring

Pros

• Many business loans have relatively low interest rates when compared to many other types of funding.
• Interest can be deductible on your taxes.
• Depending on your requirements, you may have access to large sums of money to be used to grow your business.
• On-time repayments can help improve your credit rating.

Cons

• Many small, growing businesses don't qualify for loans. They often need cash faster than the process would allow anyway.
• Most lenders have strict guidelines for loans and a lengthy review process.
• You may need to have a good credit rating. Anything else and you may not qualify, and if you do you'll likely pay a higher interest rate.
• Rates can fluctuate depending on the market. The more you borrow, the higher interest you may have to pay as the lender takes on more risk.
• An apparel business loan and the debt will show up on your balance sheet, which affects the valuation of your business.

Pros

• You can borrow when you need it.
• When you're short of cash, you can borrow only what you need as long as you don't exceed your limit.
• Making on-time payments can help improve your credit score.
• Lines of credit can have low interest rates.
• The payments on the line of credit vary and depend on your outstanding balance.

Cons

• As with loans, oftentimes banks won't give small, growing apparel businesses a line of credit. They often need cash faster than the process would allow anyway.
• There will be limits on the maximum amount you can borrow, which might not always be enough.
• Although you pay-as-you-go, if you miss payments, are late, or move outside the terms of your agreement, you might face high fees.
• It's easy to misuse a line of credit — just like it's easy to misuse a credit card.
• If your business fails, you are responsible for any payments and debt incurred from using your line of credit.
• You need to have been in business at least two years, and will need to provide bank account information, financial statements, tax returns, and more to qualify.

Pros

• It's easier to qualify for a business credit card than for a line of credit or business loan.
• You have quick access to the cash you need when you need it.
• Many business credit cards have reward programs or incentives, like cash back or airline miles.
• An apparel business credit card can help build credit, which is helpful if you ever need to apply for a bank loan.

Cons

• You may need to provide a personal guarantee to qualify.
• High interest rates, annual fees, and late charges can add up quickly.
• Security risks like fraudulent charges or stolen card numbers.
• It's easy to overspend, just like with a personal credit card.

Pros

• You have access to fast cash when you need it based on the value of your invoice(s).
• Cash advances can greatly improve shortfalls in cash flow due to slow-paying clients.
• Does not require your apparel business to have a long credit history, which is best for start-ups and fast-growing firms.
• Factoring relies on the creditworthiness of your customers, not yours.
• Invoice factoring is easier to obtain than most other forms of funding.
• Funding can increase with the value of your invoices.
• If your business is seasonal, factoring can infuse cash into your business to get you through the downtimes.
• Your accounts receivables are used as collateral, unlike many loans or lines of credit.
• You give up no equity or control in your business in exchange for funding with factoring.
• No matter the size of your apparel business, you can use factoring.

Cons

• Invoices need to be verified (customer contact sometimes required).
• Can be complicated to account for in bookkeeping.