Invoice Factoring vs DeFi Lending: Which Is Better for Business Cash Flow?
Invoice factoring provides immediate cash against unpaid invoices. DeFi lending offers alternative capital. Here is how the two compare for SME cash flow.
Cash flow management is the number one cause of small business failure. Even profitable businesses can run into trouble when customers are slow to pay. Invoice factoring and DeFi lending are two ways to access capital when you need it rather than when customers choose to pay.
Invoice Factoring: How It Works
- You sell your unpaid invoices to a factoring company for 80-90% of face value upfront
- The factoring company collects from your customers and keeps the remaining 10-20% (minus fee)
- Cost: typically 1-3% of invoice value per month — expensive compared to a credit line
- No credit check required — your customer's creditworthiness is what matters
- Best for: B2B businesses with reliable corporate clients and slow payment terms (30-90 days)
DeFi Lending Against Crypto Collateral
- Borrow stablecoins against BTC, ETH, or other crypto collateral without selling assets
- Aave and Compound provide USD stablecoin loans at 3-8% APR against overcollateralised crypto
- Access capital in minutes without credit checks — collateral is the only requirement
- Maintain crypto exposure while accessing liquidity: borrow against 50% of crypto value
- Risk: if crypto price falls significantly, collateral may be liquidated — monitor health factor
Which to Use When
Invoice factoring suits businesses without significant crypto holdings that need cash against receivables. DeFi borrowing via Steyble suits businesses or entrepreneurs with crypto holdings who need temporary liquidity without selling assets — common during tax events, business investments, or personal large purchases. The two complement each other in a sophisticated SME financial stack.