Accounts Receivable Financing
Accounts receivable financing is a time-tested financing method for producing quick working capital. Also known as factoring, this type of financing involves selling invoices to companies who do the work to get those invoices paid. You get a percentage of the total value of the invoices, and the factoring company charges a fee to collect payment from your customers. While there are advantages and disadvantages to factoring, it’s an option worth exploring if your business is in need of cash flow.
The obvious benefit of a factoring loan is the quick influx of cash to your company. If you have expenses that need to be paid in a hurry, this might be your best financing option. It allows you to pay your bills with money you earned by providing the products or services on the invoices. It also allows you to expand your business by purchasing more inventory or hiring new employees. If you have difficulty getting a traditional loan and need money quickly, factoring can help.
The invoices bought through accounts receivable financing represent what you are already owed. Because of that, you don’t need to put up assets as collateral to receive payment. You are already selling the company something it wants and can use. So there is no need to risk any of your tangible assets. Unlike selling certain stocks in your company to raise capital, you also do not have to give up any ownership of your company. While the factoring company may require you to adjust some of your business processes, the business itself remains yours.
A fringe benefit of factoring is that payment collection goes to customers. With that task off your to-do list, you can focus on other aspects of your work, such as innovations or sales. Essentially, by paying you money for your invoices, the factoring company saves you more money by taking work off your plate.
If you need money fast because of unpaid invoices, accounts receivable financing may be the best option for resolving this dilemma. You get quick cash that you don’t have to worry about paying back to a lender. And you still stay in control of your business. Give us a call today for all your accounts receivable financing needs.