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Though the interest rate on a loan might look relatively attractive, the cost of arranging and administering it must also be factored in, such as the arrangement, commitment, non-utilisation, and exit fees, plus servicing charges and legal costs of documentation. There might also be costs to pursue and recover bad debts, or to pay for credit protection. Invoice finance has its own arrangement and administration costs that might be more or less than a bank loan.

 

Invoice finance is therefore a credible alternative to a loan because:

 

it converts a company’s debtors into cash that may then be reinvested to potentially generate positive return for the company.

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