Accounts payable financing is also commonly known as vendor financing or trade credit because you borrow money directly from the vendor.
Vendors will provide buyers with credit so that they can purchase their goods and/or services. The buyer then uses the profits to pay the vendor back the loan plus an agreed interest rate.
Just like invoice financing, you won’t typically be forced to put up any physical assets as collateral. The main difference between invoice financing and accounts payable financing is that the latter requires a credit check to see if you qualify for the loan.
SMEs and start-ups typically have an unproven or lower credit rating, especially if they are still trying to establish themselves in their industry. Therefore, these companies may benefit more from invoice financing than accounts payable financing.