Bank loan vs. invoice factoring: which fits your business?

Operators routinely ask why factoring instead of a line of credit. The two are not competing products; they solve different problems. A bank line of credit funds *the company*. Invoice factoring funds *a specific receivable*. Seen that way, the choice is usually clear.

What the bank is doing

When a bank underwrites a line of credit, it's underwriting your business. Your tax returns, your operating history, your personal guarantee, your debt-service coverage ratio. The decision takes 30–90 days, the rate is excellent (single digits), and once approved, you can draw on it for almost any reason. The catch: you have to qualify, you carry debt on the balance sheet, and the line gets pulled exactly when you need it most, at the bottom of a cycle.

What we're doing

When Prime Advisor underwrites a factoring facility, we're underwriting *your customer*. Their credit, their payment behavior, their concentration risk. The cost is higher than a bank loan but lower than missing payroll, and it scales with your sales: when you invoice more, more capital is available. No new debt, no covenants, no personal guarantee on the invoice itself.

Both products have a place. Many of our clients run a bank line for general working capital and factor specific large invoices when timing is tight. The two are complements, not substitutes.

A simple decision tree

Choose the bank line if you have 2+ years of clean financials, an established banking relationship, and time for a longer approval process.

Choose factoring if your constraint is timing rather than solvency, you have $50K+ in slow-paying B2B invoices, you prefer not to add debt to the balance sheet, or bank credit is not currently available.

Pick both if: you're scaling and the bank line is sized to last year's business, not this year's.