You did not open your doors to failure. No business owner does. Still, you rely on your accounts receivable to keep your operation running, and some of your customers and vendors don’t always pay their bills on time. You need cash. This is where the leverage of your accounts receivable financing comes into play.
Not for everyone
Accounts receivable financing is a special type of financing that will not work for everyone because of how it is structured. If you don’t have customers or vendors that you regularly bill in 30, 60, or 90-day terms, you won’t be able to use accounts receivable financing for your business. This is why.
You are selling an asset
Instead of borrowing cash against collateral, you sell your accounts receivable to the lender. It would be like having an accountant do your AR, but in this case, you receive the anticipated cash up front. The lender then takes over your accounts receivable as loan repayment, which is advantageous in certain cases.
Your credit is not a problem
Because the lender is concerned with receiving cash directly from their customers and vendors, your credit isn’t the one in question, which works well if you don’t have a perfect score but still need cash. Instead, the financer will review the credit of each of your customers and vendors and alert you to any anticipated problems.
Your headache finally goes away
Maybe bookkeeping isn’t your thing and you can’t afford to outsource your accounts receivable to a CPA. The beauty of AR financing is that you are outsourcing your accounts receivable to the lender, who will bill customers, collect payments, and provide you with a monthly statement so you know how this side of your business is doing.
You can use the money however you want
Finally, it doesn’t matter if you’re just opening your doors or ready to expand, many AR lenders aren’t too concerned with how you want to spend the cash. In some cases, they’ll even help you if you’re facing bankruptcy or another financial emergency. Remember, you are selling an asset of your business, so this is a sales transaction, not a loan. The cash is yours to do with as you please.
Accounts Receivable Financing
AR financing is an alternative financing method that many business owners take advantage of. Gone are the days of walking into a congested financial institution, filling out reams of paperwork, and waiting months for a decision. Many companies are looking for alternative ways to finance their business and selling accounts receivable is a viable option.