By Kris Roglieri
Have you, as a business owner or manager, ever missed out on a great opportunity because your company didn’t have enough necessary cash flow at the time to take advantage of it and move forward? It can be frustrating to watch potentially amazing chances come and go, passing you by simply because you didn’t have enough liquidity to cover the purchase or investment. Going to the bank to ask for a loan can take weeks to get approval; extensions of credit can take forever, too. Alternately, your business may be small enough that when a customer places a very large order, you find it difficult to carry the cost of it until they pay you. Whatever the case, if you find yourself perpetually frustrated and in need of extra cash while you stare at your growing list of unpaid receivables, utilizing accounts receivable financing may be exactly what your company needs.
Accounts receivable (“A/R”) financing is also sometimes called “invoice financing” or “factoring”. It is extremely popular among businesses that struggle from day to day as they wait to be paid by their customers. Unlike a loan or credit line, no debt is created in the A/R financing process. Partnering with an accounts receivable financing company, you sell your open invoices to them at an agreed-upon rate. In exchange, the financing company pays you cash for them—often in hours, or a day or two at best. Finally, you don’t have to wait 30, 60, 90 days or even longer to access your capital. With that cushion in the bank account, you can begin safely and comfortably cleaning up your own outstanding debts. After you’ve caught up on your own bills you can start looking to your company’s future, whatever that may entail.
If your customers are reliable and have a good track record of paying their invoices on time, your business might be perfect for accounts receivable financing. After all, the financing company is taking a risk by claiming financial ownership of your unpaid invoices—they want to know that your customers are responsible and typically pay you timely. Customers who do not fit this category may not be approved for A/R financing, or you may have to absorb a less favorable invoice rate from the financing company in order for them to offset the potential loss. In any event, do not be discouraged if some of your customers are less than perfect. A/R financing companies understand that there are all kinds of customers out there, and they can probably work with you to come to an agreement that everyone will be happy with. Even at a less favorable rate, getting that fast injection of cash with accounts receivable financing is often more important than anything else.
Click here to read more on how Prime Commercial Lending can provide Accounts Receivable Financing for your business.