Accounts receivable financing companies offer small to medium sized businesses a way to get ahead – or simply get through a rough patch – even if they don’t have perfect credit. By playing a key role in improving your business’s cash flow, accounts receivables factoring companies help put you in charge of your business’s financials.
Your customers take too long, 30-days or more, to pay their bills causing a payment gap that negatively impacts your working capital. If your small business is a supplier to a large Fortune 500 company or government entity, your customer may use its stature to its advantage by holding off on payment for as long as it can.
Partner with Accounts Receivable Finance Companies to Improve Your Cash Flow
Yet when you partner with an accounts receivable funding company, your customer’s stature becomes your advantage. How? With AR factoring, your eligibility for funding is primarily based on the credit history and standing of your customer rather than your business.
So if you have an enormous Fortune 500 company as a customer, you can leverage its size and stellar record to collect on your receivables in 3-5 business days. (Even if your customer isn’t a Fortune 500 company, as long as they have a good credit history they likely qualify for accounts receivables factoring.)
The process of accounts receivables factoring is based on the quality of your customers. For this reason, you can work with an accounts receivable financing company even if you don’t have a great credit score, are unestablished or a new business, lack a record of business growth and profitability and more.
Fast Cash, But Not a Business Loan…
Accounts receivable financing companies are not banks and accounts receivables funding isn’t a loan, though sometimes people get the two mixed up. Loans need to be paid back – with interest; obtaining a loan also means your business has to take on additional debt.
Though it is a lesser known commercial financing option, ar factoring has actually been around for hundreds of years; it is not some new, untested financing fad that isn’t likely to last. With the slowdown in traditional bank lending the past several years, more and more businesses from all types of sectors have started to recognize the benefits and uses of accounts receivables funding over traditional banks. (It is worth mentioning that you will find a handful of established banks offering AR factoring and other alternative commercial funding options.)
Advantages of Working with Accounts Receivables Factoring Companies
One of the greatest benefits of working with accounts receivables factoring company is improving your business cash flow. When most businesses start out, they’re primarily concerned with sales. After all, sales are often said to be the lifeblood of any business. Reps. are paid top-dollar for bringing the customer to your door and getting that all-important contract signed. Sales are fun and exciting; the pursuit of landing that important client is the thrill of any business.
AR Factoring Companies Drive Importance of Collections
Yet once businesses get established and start moving forward, they start to recognize that sales is only part of the equation. Though it’s not nearly as thrilling and talked about, collections is the other side of the sales equation and nearly as important. After all, sales without collection is really nothing more than a promise.
And this is where accounts receivables factoring companies come into play. Imagine how much more productive and booming your business could be if it collected on its sales in two to three business days? No more waiting to get paid or dealing with insufficient working capital. The uncertainty and ambiguity associated with waiting on customer payment is gone and replaced with scheduled and on-time cash-in-hand.
What are the Benefits of This Financing Option
There are a number of reasons that businesses seek out AR financing companies. Many of these are directly related to reducing the cash gap for incoming revenues on net terms. This increases the operating cash that a company has to use for investments and expenses. The top reasons are that this financial tool will:
- Enable your business to collect on its invoices in a 3-5 business days so you can improve cash flow and general business planning and preparation.
- Offer fair and transparent rates and fees for their services. Rates can vary from 2-9 percent so shop around and make sure to include fees in your total factoring costs.
- Offer back office support and handling of your account receivables and collections’ functions.
- Can vet a potential client ahead of time by running a credit check on them to make sure they have a proven history of paying their bills on time.
Choosing Accounts Receivables Financing Companies
Each accounts receivables financing company has its own costs, policies and procedures so it pays to shop around and compare your options. If you are a trucking company, you may want to specialize with a freight bill factoring company that knows your region and your industry.
Other accounts receivables financing companies have a national reach and can providing high volume financing of more than $250,000 per month to any business. Whatever type of accounts receivables financing company you are looking for, you can find it here.