In an ideal world, you have lots of clients who all pay you on time, so the money you need comes into your cash flow quickly. Unfortunately, it doesn’t work that way. Even on-time payments can come 30 days after invoicing, so companies can experience a cash flow crunch in the meantime.
Accounts receivable financing lets companies leverage unpaid invoices as collateral in a financing agreement. Also known as factoring receivables, accounts receivable factoring turns unpaid invoices into cash, helping to solve cash flow problems—factoring can get companies more than 90% of the outstanding balance as quickly as the same day. The cash can help companies continue to grow their business while waiting for payments from current clients.
Because factoring receivables isn’t a loan, there’s no debt to repay and no impact on the company’s credit score or ability to take out other business loans. The paperwork process is straightforward. There’s also no collateral needed. This means factoring reduces the stress of waiting for payment without adding any new stress of its own.
AR factoring benefits companies because it is flexible, so companies can use it only when needed. It’s better than a credit line because you aren’t limited to a predetermined amount based on past business; you’re extended funds based on what’s due to you now. Benefits of accounts receivable factoring are that there’s no minimum or maximum amount and no commitment to do it regularly. The costs to factoring are low, with rates that are far better than taking out a cash advance on business credit cards. The cost is also favorable when compared to the expenses of monitoring and collecting payments on your own.
Another of the benefits of accounts receivable factoring is that you have more flexibility for dealing with your customers and vendors. Since you know your cash flow is secure, you can offer better terms to your customers. You can also take advantage of early payment discounts offered by your vendors.
EZ Factoring Companies helps businesses find accounts receivable factoring companies. We match companies with factors who specialize in their industry to ensure you receive all the AR factoring benefits. Contact us to explore the ways accounts receivable financing can help solve your business cash flow problems.