Accounts Receivable Financing Basics
Operating a business can be an expensive experience. To keep your company successful, you need to stay mindful of some of the bigger obstacles you might face. Cash flow troubles, for example, are a common issue that many business owners deal with. When you are unable to access your working capital because of issues like customers who are not paying invoices in a timely fashion, then you absolutely need to look at your financing options. Accounts receivable financing is a simple and effective financial service that might be able to help you get ahead.
Understanding the Basics
Before you get started with a service like A/R financing, you might want to know a bit more about the details. Essentially, this is a service that you will want to explore when customers are not paying in a timely manner for jobs you’ve completed. A factoring company will purchase qualifying invoices from you and give you a portion of the total value in cash. The rest of the debt will be collected from your customer and you will receive the difference once that is complete. You pay a fee for the service and have working capital once more.
A/R Financing Benefits
There are a number of key advantages you can expect when you explore accounts receivable financing. For one, this is different than a traditional loan. Instead of taking on additional debt, this service provides you with an advance on the money you are already owed. This can be a huge benefit to business owners who are worried that their financing options will only cause more problems. Additionally, factoring is a service that can be used whenever you have extra invoices in your possession. This flexibility can prove advantageous in a pinch.
Know the Details
While a service like factoring can definitely be beneficial for the future of your business, there are a few points of which to stay aware. For one, not all invoices will qualify. In most cases, factoring companies will only purchase invoices from clients who are reputable. This means that larger corporations and government contracts are your best bet when you are seeking to sell some invoices. Before you assume this service is perfect for you, be sure to give yourself time to look over the details of which invoices qualify.
When money is tight and you need to boost your cash flow, accounts receivable financing is a wonderful option. Look into the details and learn about whether or not this is the right fit for you.
