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Invoice Factoring vs. Traditional Financing: Which is Best for Bodyshops?

  • Date: 10th March 2025

When considering funding options for your bodyshop, it’s important to understand the choices available. Just as crucial is identifying which options best suit your business, as not all solutions will be a good fit.

In this month’s blog, we’ll compare traditional funding methods like bank loans and credit cards with more modern, accessible options such as invoice factoring.

What does traditional financing look like?

Traditional financing usually means securing funds from established financial institutions like banks or credit unions. These options often require a strong credit history, collateral, and a comprehensive business plan. While commonly used, they tend to have lengthy approval processes and may not offer the flexibility that every bodyshop needs.

  • Bank loans: Bank loans are a common financing option, but they can be especially time-consuming for bodyshops, requiring extensive paperwork, personal guarantees, and fixed monthly repayments that may strain cash flow during slow periods. This makes them less ideal when you need quick turnaround times for repairs and getting customers back on the road.
  • Credit cards: Credit cards might appear to be the fastest way to access funds, and while they offer flexibility, high interest rates and limited borrowing capacity make them less ideal for financing your bodyshop. A successful bodyshop relies on steady cash flow, and credit cards can disrupt operations by putting unnecessary strain on finances.
  • Invoice discounting: Invoice discounting lets businesses borrow against outstanding invoices, offering quick access to cash without waiting for customer payments. While it helps manage cash flow, you’ll still need to handle collections, and a portion of the invoice may remain unpaid after the discounting fee is deducted.

A common theme amongst these three traditional financing methods is that there are incurred costs. What sets invoice funding apart is its genuine flexibility, leading to real cost savings. Your bodyshop decides precisely how much funding is needed at any moment, ensuring you only pay for what you use, nothing extra.

Why is invoice factoring the best option for bodyshops?

Invoice factoring is a financial service where a bodyshop sells its outstanding invoices to a third-party provider, like ACG. After completing repairs and issuing an invoice, the bodyshop can factor the invoice to receive immediate payment. This enables quick access to funds, instead of waiting up to 90 days for payments from networks or insurance companies.

This service provides immediate access to funds, enabling you to cover parts and operational expenses without waiting for payments. It eliminates the constant cycle of financial uncertainty, ensuring a steady cashflow throughout the year and giving your bodyshop the opportunity to grow and thrive.

With invoice factoring, the factoring company also handles the task of chasing payments from insurance companies or networks. This reduces your administrative burden and ensures timely collections, allowing you to focus on running your business without the stress of chasing overdue invoices.

Invoice factoring is particularly well-suited for bodyshops due to its fast and simple process. Unlike traditional financing, which can be a lengthy and complicated procedure involving credit checks, financial statements, and extensive paperwork, invoice factoring allows you to quickly access the funds you need. Services like ACG’s result in a seamless experience, enabling your bodyshop to maintain steady cashflow and focus on repairs, without being held back by the delays of traditional financing methods.

An example of how invoice factoring can benefit bodyshops

Chris Haddow, Managing Director at Glasgow Bodyshop explained how invoice factoring has proven to be the ideal financial solution for his bodyshop, “From a cashflow perspective, the next day payments are a game changer. Having the money in the bank means we’re one step ahead. ACG is always on it, they make sure the payment packs are spot on, meaning that everything is processed in time, making life so much easier for us.  As we grow our operations, we’re going to explore the advanced funding services where we can get 40% of the repair invoice up front. This service is ideal for us as we look to take on more work from varied sources and this will support us in being able to do that.”

For bodyshops, maintaining steady cashflow, accessing flexible funding, and minimising administrative tasks are key to success. While traditional financing options such as bank loans, credit cards, and invoice discounting can be useful, invoice factoring provides tailored benefits that address the specific cash flow challenges bodyshops face.

By opting for invoice factoring, you can focus on what matters most, delivering top-quality repairs to your customers.

If you’re ready to take your bodyshop to the next level with improved success and efficiency, speak to the experts at ACG.

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