What To Know About Receivable Financing

Factoring and accounts receivable financing are excellent ways to maintain consistent cash flow when you lack sufficient revenue. Whether your business faces sudden, unexpected costs, seasonal changes, or time-sensitive investment opportunities, an influx of cash can keep it on its feet.

This commercial lending involves using your unpaid invoices as collateral for funding. You can get a cash advance loan or a line of credit, depending on the borrowing method you select for your company. The amount of money you receive varies based on the quality of your invoices, the lender’s fee structure, and the funding program type.

Should Your Business Use Receivables Funding?

There are pros and cons to any financing. You must consider various aspects before deciding if invoice financing is right for your business. Since you secure your funding with your accounts receivable, you do not need other assets to serve as collateral. With this advantage, you keep your other lines of credit available for future needs.

Your long-term success depends on your ability to manage cash flow and pay operational expenses. Accounts receivable financing gives you fast access to necessary funds. When cash flow is running low, waiting for the time-consuming procedures of traditional bank loans can spell disaster for your company.

What Are The Benefits?

In addition to fast funding, you also benefit from the simple application process and minimal qualifying requirements. Finance companies will look at your business revenue history and your client’s payment history to determine eligibility. If your business is thriving and growing, you will likely gain approval. Unlike conventional loans, lenders offering this kind of financing do not rely primarily on your financial history or creditworthiness. This advantage means you can qualify even with poor credit.

Selective receivables financing offers additional flexibility as you can choose which invoices to submit for cash advances. Factoring gives over control of your receivables to the finance company, relieving you of the debt collections process. This element can be helpful for your company if you need more time, employees, or systems to devote to collecting unpaid bills.

Are Accounts Receivable Financing Right for You?

Solving short-term cash flow problems is critical for the success of your business. A sudden inability to pay daily expenses can put your company out of business. With invoices backing your loan, you can get quick cash to pay necessary costs. The streamlined application and funding process makes this lending a good solution for addressing working capital gaps.