Let’s face it—finances are confusing. Each option comes with its own terms, conditions, and intricacies. That means what might be great for one business is over-complicated and costly for another. To make it easier, our team is breaking down the difference between our line of credit and another popular option, invoice factoring. Keep reading to learn about terms, potential risks, and much more.

Invoice factoring (or factoring) allows government contractors to sell their unpaid invoices at a discount and get instant access to capital. Once the invoices are approved, the factoring firm will buy them and transfer funds, usually at a rate of 80%-85% of the total invoice value. Although it was originally designed to complement credit financing for large firms, factoring is now a common way for businesses to bolster their cash flow during a slow season.

However, small businesses often deal with smaller invoices, and that means they need to be aware of potential pitfalls. Factoring has been known to trap small businesses in a cycle of dependence that proves difficult to escape. What do we mean? GovCons can find themselves continuously factoring new invoices to offset previous ones, constrained by the obligation to sell entire invoices, and limiting their overall financial options.

So, how is Parabilis different? Unlike selling invoices, with Parabilis, you borrow against your prime and subcontractor invoices that have already been billed. You also only borrow what’s necessary, instead of an amount based on the invoice’s total, and that keeps your capital costs much lower than factoring. As you secure new contracts or expand your team, Parabilis can increase your line of credit to provide the support you require.

At the beginning of your annual agreement with Parabilis, you’ll have a commitment fee, which is determined as a small percentage of your line of credit limit. We then apply a fixed interest rate solely to outstanding funds. When your balance reaches $0, any additional payments are promptly refunded to you.

Our pricing is clear and free from complex formulas or hidden charges. We are committed to providing you with a transparent lending experience to help your business grow. Once you settle your credit, consider it done!

For more information on how Parabilis can help your small business, visit our Line of Credit page or contact us.