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When invoice finance beats a term loan
If your funding gap grows every time you win work, a loan treats the symptom and invoice finance treats the cause.
There is a specific pattern where a term loan is the wrong answer, and it is common enough to be worth naming.
The tell
You pay staff or suppliers before your customers pay you, and the gap gets wider every time you win a contract. Growth makes it worse, not better.
Why a loan does not fix it
A term loan gives you a fixed lump sum against a gap that is not fixed. Take £100,000, grow 40%, and you are back where you started with a repayment to service on top.
Why invoice finance does
The facility scales with your sales ledger. Raise more invoices and more funding becomes available automatically, so the gap stops widening as you grow.
When it is still the wrong answer
If you sell to consumers, take payment on delivery, or have a handful of customers making up most of your ledger, invoice finance is either unavailable or unwise. In those cases a term facility genuinely is the better route.
Written by Tazo Finance
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