What is accounts receivable financing? In a nutshell, this is when a business sells its accounts receivables to a factoring company while getting short-term funding in return. This is a fast and efficient way for you to secure working capital to invest back into your company. Factoring is a great option when getting a bank loan is pretty much impossible for you. You can receive up to 90 percent of the invoice amount. The factoring company will consider your clients’ credit, not yours directly. If you face many challenges, such as issues with being a start-up or minority-owned business, for example, accounts receivable financing is an ideal option. The company should make $25,000 or more a month in revenue in order to be approved for accounts receivable financing.
Accounts Receivable Financing is nothing new in the world of business funding. It’s becoming a better and more effective solution for companies in any manner of industry, from staffing and medical to oil and gas. When you sell unpaid invoices, you can get immediate cash without using any assets as collateral. You can’t do that when obtaining a traditional bank loan, which puts your assets at risk if you aren’t able to repay the loan.
After you sell your invoices to the factor, that company deals with all of the collection duties, but not in an aggressive way like you would find in a typical collection agency. Rather, they come at it from a valued business partner approach. This is why accounts receivable financing is useful for small businesses.
You can use accounts receivable financing to buy much-needed inventory, raw materials, and equipment, or to meet payroll or operational expenses. Thus, you are allowed to grow and make more money to expand your company in a variety of ways. Learn more about accounts receivable financing when you give us a call.
Another great resource is to check out this book we recommend on accounts receivable financing.