The Types of B2B Financing and How You Can Automate It

No business likes to turn away qualified customers because they don’t have the cash on hand to pay at the time of purchase. Yet, some small and medium-sized enterprises (SMEs) often have trouble keeping up with their billing needs because cash flow isn’t always consistent. 

As a result, these companies can suffer from low profits, high receivables, and lousy customer satisfaction scores, among other problems. Fortunately, B2B customer financing software can help solve this dilemma by automating invoice factoring and making B2B customer financing easy.

  • Revolving Credit Lines

A revolving credit line is a type of credit that allows you to borrow against your balance up to a set limit. This means that you can take out more money than what’s in your account at any given time.

  • Direct Lending

The business owner approaches a bank, credit union, or finance company for a short-term loan. The borrower pays interest on the loan, but no collateral is required. There are various reasons why customers who desire direct lending opt for banking with SoFi and other online lenders over traditional banks – these include higher savings rates, low introductory APRs, bonuses and rewards programs, etc.

  • Net Terms

According to the experts at SoFi, “Net terms can be an effective way to make purchasing easy for new customers.” In net terms, you invoice your customer after delivery but before payment is due.

  • Venture Debt

Typically offered by banks, venture debt is a cash infusion for a business that isn’t quite able to secure funding from other sources. However, a venture debt loan can be helpful if you need money quickly or if traditional loans aren’t available.

  • Structured Equity Products

Several structured equity products provide capital to small businesses, including convertible debt and convertible notes. With a convertible note, you receive funding upfront to agree to pay back a certain percentage of interest regularly.

  • Invoice Discounting

Invoice discounting is a type of invoice factoring. So instead of taking out a loan when banking with SoFi, you get a short-term advance on your invoices.

  • Mezzanine Financing

Mezzanine financing is a type of middle-ground financing that provides a company with what it needs to scale up its operations, either by purchasing real estate for more office space or buying new equipment.

  • Invoice Factoring

Invoice factoring is a common type of financing that allows companies to receive money for invoices before their customers pay them. For example, the business will sell its invoice at a discount, typically 80% or less, and then immediately receive cash from an investor or lender who buys it at full price. The business can then use that cash to pay its expenses until it receives payment from its customer.

  • Debt Financing

Debt financing (also known as vendor financing) is when a business borrows money from a creditor to pay for purchases that it will later payback. Depending on your specific needs, there are multiple types of debt financing available for businesses.

From time to time, new business owners struggle with finding capital for their company. For example, if you’re having trouble attracting investors or getting a bank loan, you may want to look into alternative financing options like invoice factoring or banking with SoFI Invest (SoFi Bank).