Is Accounts Receivable Financing a Good Option for Your Business?
When many business owners need to increase the amount of money coming in, their first thoughts turn toward leveraging their inventory or pieces of equipment. However, there is another way to bring more money in consistently, and it is referred to as Accounts Receivable Financing. This is the process of leveraging all your unpaid invoices consumers still owe you. A specialized company will pay you a percentage for these invoices upfront minus a fee. You will receive the rest of the value of the invoice once it is paid in full by the client. It can be extremely advantageous for many types of businesses, but like any other type of financing, there are certain times when it will become particularly beneficial. In this article we are going to explain why accounts receivable financing is the beneficial to your business.
Increase Cash Flow
It is a good option if you need to enhance your cash flow. Most businesses give customers 30 days to pay off invoices, but there are plenty of people out there who will not pay it back until much later. These delays make it tough to have money regularly flowing through your business, but Accounts Receivable Financing is more reliable. It is also great for maintaining loyal customers who often pay late. You can still receive their business while getting money in a timely fashion.
Higher Approval Rates
It is also good for businesses that have trouble receiving other methods of financing from banks and other institutions. Banks look at a number of factors when determining whether to loan money to a company. These include credit rating, business history and many others. Some companies may require money but are viewed as too risky for most mainstream banks. Companies that acquire invoices typically only look at the value of the invoices themselves. Therefore, you have an easier time qualifying for Accounts Receivable Financing than other services.
Finally, this is a good financing option if you do not really have any collateral to offer an institution. With some banks, you may need to offer collateral, such as your building or vehicle, to give to the bank in the event you cannot repay the loan. This can be risky for some business owners, so selling your accounts receivable can be the more prudent route to take. While you will lose a portion of the value of the invoice, it is well worth it in the long run.
You no longer have to worry about contacting clients over and over again to get them to pay off an invoice when you can get someone else to do it for you. Invoice factoring has helped numerous businesses over the years.
Accounts Receivable Financing
Are you still unsure if Accounts Receivable Financing is the correct option? Speak with an expert at Elite Capital Financing and find out today!
