Accounts Receivable Financing: How Your Business Can Reap the Benefits

 

Introduction

A big part of running any business is managing your cash flow. That’s why it’s important to explore all the options available to you when it comes to financing your company. One option that might surprise you is accounts receivable financing. If done correctly, this type of small-business loan can provide your business with a huge boost in working capital without putting any strain on your balance sheet—and without committing you to any long-term contracts or collateral requirements.

Incredibly Fast Turnaround Time

Accounts receivable financing is incredibly fast. In fact, it usually takes between 24 and 48 hours to get approved for a line of credit—often faster than you can apply for a traditional bank loan. And when you’re approved, funding can be transferred in as little as two days. This means that instead of waiting weeks or even months to get paid by your customers, you’ll be receiving funds almost immediately after the deal is made.

An Alternative to Traditional Business Loans

Business loans, while an excellent source of capital, may not be the best fit for your business. The approval process can be lengthy and expensive, plus there are many terms that you need to meet before you can get approved.

A better solution is accounts receivable financing. This type of financing offers fast access to cash while remaining flexible enough that it won't constrain your business operations or require a large-scale financial overhaul. Accounts receivable financing gives businesses the opportunity to secure working capital without putting their growth on hold

Offers Your Company More Flexibility

Accounts receivable financing offers your company more flexibility than traditional bank loans. The money you borrow can be used for any purpose, including:

·         Acquiring new equipment or technology

·         Paying off debt, such as other outstanding invoices and loans

·         Investing in the business (e.g., advertising)

The money can also be used to hire new employees or even expand your operations.

It’s Not a Loan, and a Lot Less Risky

The reason for this is because when you receive money from an accounts receivable financing company, they are not taking on all of your debt risk. Instead, they are only lending out part (or all) of what they are owed by your customers—and providing some collateral in exchange for doing so. If anything goes wrong with their repayment schedule or other terms and conditions set forth by the agreement between you and them, then both parties share equal liability for any losses incurred during this time period until such time has elapsed where either party wishes to terminate their relationship or renegotiate terms based upon updated financial information coming in after some period has passed since entry into initial contract was made back when first began offering services/products/etcetera directly through channels previously mentioned above…

No Restrictions on Use of Funds

You can use your cash advance for any business purpose, so long as it's not prohibited by the terms of your contract. For example, a cash advance from a traditional lender such as a bank or credit union might be restricted to paying off existing debt or purchasing inventory, but an accounts receivable factoring company will allow you to use the funds for any legitimate expense that improves your business in some way.

Cash advances can also be used for any type of asset or transaction—from purchasing new equipment and supplies to paying down expenses on your current assets (such as utilities). This means that if you need money to buy more office space in order to expand into a larger location, an A/R factoring company will likely be able to help you out. They'll even work with companies that aren't currently offering their own invoicing services, making them an ideal option for small businesses looking for alternative funding options.

Finally—and perhaps most importantly—accounts receivable factoring companies make it possible for small businesses without payroll departments (or those without dedicated HR staff) to hire employees at competitive salaries without incurring additional costs.

Minimal Effort Required by Your Company

The most important benefit to accounts receivable financing is that it requires no monthly payments. The fact that you don't have to make any additional payments on top of your current cash flow can be a huge relief for businesses in need of extra funding.

Because there are no monthly payments, you won’t have to submit detailed financial records or provide personal guarantees. In addition, since no collateral is required, even businesses with bad credit history or good credit history can benefit from this type of loan.

Conclusion

You may have heard of accounts receivable financing, but maybe you aren’t sure what to make of it. After all, there are many things that can go wrong with a business loan. It’s not uncommon for companies to find themselves unable to repay their loans due to poor financial planning or unexpected expenses, which can lead not only ruinous consequences for your business but also affect its employees and customers as well.