Off Balance Sheet Financing

A benefit associated with invoice factoring is the off balance sheet nature of the financing. By making advances on invoices the transaction with the factoring company does not appear as a loan or net long term liability. Thus the strategic necessity to keep the liabilities down to improve the balance sheet is maintained. As each invoice is retired, paid by the customer to the factoring company, the transaction is complete. Doing this also relieves the discipline of tracking income against the outgoing expenses. Using a bank credit line in a manner that does not enable frequent pay downs will ultimately result in a transition to term product which does not look good from the banks standpoint and clearly makes it harder to borrow more in the future.