Why You Should Consider Accounts Receivable Financing

It can be difficult for businesses to maintain enough cash throughout the month to cover regular expenses, especially when customers are slow to pay their invoices. If you run your own company and have had a cash flow crunch recently, you may be wondering what your options are. While conventional bank loans may be helpful in cases where you need large sums of money, for a short-term solution, you may want to consider accounts receivable financing instead. This financing method, sometimes also called factoring or A/R financing, allows you to see your outstanding invoices to a factoring company for an advance on part of the total amount. Here are a few of the top reasons why you should consider AR financing to help your business through a cash crunch.

Terms Can Be Negotiated

If you’ve had difficulty applying for traditional loans in the past, you may be concerned about whether you’ll qualify for A/R financing and whether the terms will be manageable. Thankfully, factoring usually involves a straightforward application process, since factors are more interested in your customers’ creditworthiness than yours. Additionally, terms may be negotiated based upon a number of different factors. These can include your customers’ history of on-time payments, the number of invoices you’re selling, what those invoices are worth, and how soon they’re likely to be paid in full.

You Can Get Quick Capital

Unlike conventional loans, which can take months to get approved for, factoring allows you to access the capital you need quickly. In fact, in some cases, you may even receive cash within a week or 48 hours of applying! If your company needs some money to tide you over and you can’t afford to wait around on lengthy application processes, A/R financing could be a good alternative option.

You Can Improve Your Cash Flow

As any business owner knows, income can be unreliable based on how many customers you get each month. With factoring, you can help smooth things out and improve your cash flow a bit. By getting money now instead of waiting for customer payment, you can help keep your working capital more stable.

Running a business requires keeping a lot of working capital on hand at all times, and when customers take 30, 60, or even 90 days to pay their invoices, this can sometimes be difficult. Thankfully, if this is the case, you don’t have to take out a large, lump-sum bank loan. Instead, you may want to consider accounts receivable financing and the benefits it could provide your company.


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