Accounts Receivable Financing Facts in a Nutshell
Accounts receivable financing offers versatile financing for your cash flow needs. Whether you’re a small business owner struggling to keep up with monthly payments or simply need a way to grow your business successfully, learn all the essential facts about this financing option.
When you need cash fast, this form of financing allows you to access your future payments soon. Many companies, particularly business-to-business transactions, require you to wait as much as 90 days to receive your payment. When you finance your accounts receivable your lender will offer you a percentage of the payment in as little as a few days, or up to a week.
Of course, you won’t receive the full amount. Your lender will typically offer 75 to 80% of the total amount. Your lender will also take on the task of receiving the payment from your client. You won’t have to worry about late payments or extension requests.
Accounts receivable financing is an excellent option for small businesses that don’t have a strong credit score. This financing relies on the credit score of your client, so you can receive funding even if you don’t have a solid credit score or a strong history of financial statements.
Another name for this form of financing is factoring. Most financial institutions offer a commitment-free relationship. Whether you need to finance a single account receivable or all your receivables for a year, enjoy as much or as little financing as you need. This is also a great way to start a relationship with a financial institution.
Early on it may be difficult for your business to find a funding option. However, with a professional relationship with a lender, you’ll have a greater chance of receiving a traditional bank loan or line of credit in the future. Improve your credit score while also shoring up your working capital for sudden expenses or daily operating costs.
There are many forms of accounts receivable financing. You can receive an asset-based loan secured by your accounts, inventory financing, purchase order financing and more. Talk to a lender today to learn which form of financing is right for your specific situation. There are many advantages and disadvantages for each particular financing, and each one can have varying rates. Once you have a relationship with a lender, ask about flexible rates or discuss other ways you can take advantage of flexible financing to improve your cash flow situation.