Accounts Receivable Financing
Accounts receivable financing uses your outstanding invoices as a form of collateral to help you obtain financing or an advance for your business. But unlike factoring, you do not sell your invoices to a third party. You will continue to remain responsible for collecting on your outstanding invoices while making payments towards your loan.
With accounts receivable financing, you don’t have to worry about waiting for payment terms that can stretch over weeks or months. Instead, you can access the funds you need immediately and use them to cover important expenses like payroll, inventory, or expansion. Plus, accounts receivable financing is not a loan, so you don’t have to worry about adding more debt to your balance sheet.
To learn more about how accounts receivable financing can help your business today, complete our 15-Second Online Application here to speak with a business financing advisor.
Tips for Utilizing Accounts Receivable Financing
Receivables financing works for businesses with continuing sales generating regular invoices. Ensure accounting systems are capturing all receivables clearly. Have proper protocols for invoicing, collections, and dispute resolution.
Start conservatively with lower percentages or amounts to test the option before increasing scale. Be selective on accounts to finance based on customer credit risk – don’t finance every receivable. Maintain strong communication with the financing provider.
Have a transition plan as business banking and credit relationships improve to shift to lower cost lines of credit over time if possible. Use receivables financing strategically versus a long-term solution.
Benefits of Accounts Receivable Financing
The key benefits of receivables financing are turning unpaid invoices into immediate cash flow to cover operating expenses while waiting on customer payments. This smoothes out cash flow fluctuations.
Financing provides funds without relying solely on sales projections or business assets. Costs can be lower than high-interest financing options like merchant cash advances. Approval decisions are faster as well.
As customers pay invoices, funds from the receivable come back to the business’s bottom line after the lender takes their percentage. This revolving structure provides ongoing liquidity.
Accounts Receivable Financing Requirements
- No minimum FICO to apply
- Monthly sales over $42,000
- Aging AR report
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