Why Accounts Receivable Financing Is So Important

 

Introduction

Accounts receivable financing, also known as cash flow financing, is a great way to get access to capital without having to wait for your customers to pay you or go through traditional lenders. It provides businesses with the funds they need while giving them the flexibility they need.

Quick access to capital

Whether you need to access capital for a one-time purchase, or you need interim funding to keep your cash flow positive until the next payday, accounts receivable financing is a flexible option that can be tailored to meet your needs.

Accounts receivable financing allows businesses to access capital without having to use their equity as collateral. There are no restrictions on the use of funds, and there is no impact on credit rating or business credit history.

A non-traditional funding solution

Accounts receivable financing is a non-traditional funding solution that provides access to capital without the need for collateral. Accounts receivable financing will allow you to keep your business running without worrying about cash flow problems, but it’s not a loan, it's a financing option.

An accounts receivable factoring company buys your invoices in advance and then pays you immediately after they collect the funds owed by customers. In this way, you can access cash when you need it most and free up working capital for more productive uses (i.e., growing your business).

Smooth cash flow

Accounts receivables financing is a short-term loan that lets you borrow money against the value of your unpaid invoices. This can be a very effective way to smooth cash flow and keep your business running smoothly. The loan is paid back with interest, but it's usually around 6 or 7 percent, which is lower than what most banks would charge for the same amount of money.

The term of an accounts receivable financing agreement ranges from 30 days to 90 days, depending on what works best for both parties involved—you want to get the money you need quickly so that you can pay bills or buy more inventory; lenders want to make sure their interest rates are covered by collecting on all those invoices before they become obsolete due to aging past their credit terms.

Flexibility to expand or adjust spending as needed

·         You are able to adjust your spending as needed.

·         You are able to expand or contract spending as needed.

·         You get cash flow when you need it.

Conclusion

Accounts receivable financing is a great way to get the cash flow you need to grow your business. Whether you’re looking for funding for inventory, equipment upgrades or other capital expenses, there are many options available for small businesses today.