Many businesses have difficulties with cash flow due to unpaid invoices. Accounts receivable financing, also known as factoring, allows you to use these invoices as a source of funding for your business. When you sell these invoices to a factoring company, you receive 70 to 90 percent of their value immediately and the rest, minus a factoring fee, when customers pay their bills. Here are some of the benefits of this form of financing.
When you apply for loans and lines of credit from traditional banks, the process is difficult and a large percentage of applicants are refused. However, you have a much better chance of your application being accepted for accounts receivable financing.
Avoid the Need for Collateral
Accessing other forms of funding such as loans requires you to provide collateral in the form of your house, business properties, equipment, inventory, vehicles, or other valuables. However, when you obtain financing through factoring, collateral is not necessary.
Obtain Funding Regardless of Your Credit Score
You can qualify for accounts receivable financing even if your credit score is low. This is because the factoring company is more interested in the credits scores of your customers who owe them money. You can even boost your credit score by accessing this funding because as your cash flow strengthens you will be able to pay your bills on time.
Receive Funds Promptly
Applications for traditional loans take weeks or even months to process. When your application is approved for accounts receivable financing, though, you can often have the funds you need within 24 hours.
Accounts receivable financing is a method of funding that does not require regular monthly repayments. Instead, you receive an advance on your customer’s bills, and the factoring company is compensated when your customers pay.
After you have sold your accounts receivables to a factoring company, you do not have to go through the tedious process of collecting the funds owed by your customers. The factoring company takes care of collections while you focus on your business.
For more advice on accounts receivable financing, contact Jasema Capital.