Knowledge base · Factoring · 5 minuten · 31 Jul 2026

Factoring or bank credit: which fits when?

Factoring and bank credit both answer a working capital question, but they work very differently. A bank facility has a fixed limit, factoring grows with your turnover. This article covers when each one fits, and why it is often not a matter of either-or.

A man in an office looking at a whiteboard with a few notes on it

Two products, two logics

A bank facility and factoring both answer a working capital question, but they work in fundamentally different ways. That difference decides which one suits you.

A bank facility is a loan with a fixed limit. That limit is set on the basis of your position at the time you apply: your balance sheet, your security, your track record. Grow fast afterwards and you hit the ceiling, and you have to renegotiate, with a fresh assessment and often fresh security.

Factoring works the other way round. Your funding headroom is tied to your invoicing. Submit more invoices and the available headroom grows with them, automatically. There is no ceiling holding you back at the very moment you want to accelerate.

When a bank facility fits

A bank facility often suits a stable, predictable capital need. Think of an investment in a machine, a building or an acquisition: a one-off amount with a clear repayment schedule.

Interest on bank credit is generally lower than the cost of factoring. Against that, a bank asks for more security, the process takes longer, and the headroom does not move with your turnover.

When factoring fits

Factoring comes into its own where the working capital need moves with your activity. Growth, seasonal peaks and long payment terms are the classic situations.

It suits businesses where costs run ahead of income: you pay staff, materials or stock, and then wait 30 to 90 days for your money. That the market outside the bank is growing shows in the figures: at the three large banks, outstanding SME credit fell by 0.7 billion euros in 2024, while SME finance through Dutch fintechs grew by 27 per cent in the same year, to 3.2 billion euros.¹

The cost difference against a bank loan is real, but the comparison is lopsided. With factoring you pay for speed and flexibility, and you build up no debt. With a loan you pay interest on the whole amount, even on the part you do not use.

It does not have to be a choice

In practice it is rarely factoring or the bank. The two combine well. A bank might fund your fixed assets, while factoring looks after your day-to-day working capital. Which form suits which situation is set out in which type of finance fits you.

There is one point that often gets overlooked. If your receivables are already pledged to the bank, factoring can only follow once that pledge has been taken over. That can be resolved, but it is exacting. A financier who coordinates the process keeps you out of it.

What it comes down to

Which product is better depends on your situation. If your need is one-off and predictable, a bank facility is often the logical route. If your need moves with turnover, season or growth, factoring is usually stronger. And often the best answer is a combination, provided your security is free to use.

Sources

De Nederlandsche Bank, Financiering via Nederlandse fintechs in drie jaar tijd meer dan verdubbeld, 6 October 2025.

About the author

Jaap van Aalst

Commercieel directeur, SOOF Finance

Jaap van Aalst started his first business almost thirty years ago, in staffing and secondment. That is where he saw for himself how many opportunities are lost when money sits too long in unpaid invoices.

Around eighteen years ago he moved into the factoring world, as commercial director. Since then he has sat across the table from countless business owners and seen at first hand what financing questions look like in practice. He looks further than the balance sheet: what the business does, where the opportunities are, and which form of finance genuinely moves it forward.

That is also the basis of his work at SOOF Finance. His starting point is simple: finance is not an end in itself, but a means by which a good entrepreneur delivers on their plans.

Ask your question

Frequently asked questions

Yes. The pledge is then redivided between your bank and the financier. That takes coordination, and SOOF Finance handles it.

Yes. The headroom follows your receivables book. With a bank facility the limit is fixed until you renegotiate.

Start with your bottleneck, not with the product. The trade-off is set out in which type of finance fits you.