How Small Businesses Can Benefit From Receivables Financing

receivables financingReceivables financing provides significant benefits in financing small businesses. It allows them to raise capital without having to depend on a bank loan or other sources of debt. Receivables financing allows companies to utilize the resources they already have managed to develop, mainly their clients, to generate capital.

Companies that bill their clients (via receivables or invoices) often have to wait between one and three months before they receive payment. Such payment is for jobs they have already completed. Financial investments in these jobs are in the form of materials and personnel.

The problems are that a company is not able to recoup these costs for some time because of the invoice from their clients, causing financial problems.

A company may begin to experience cash flow problems. If these problems become severe enough, and executives cannot find a way to infuse capital into the business, they may have no other choice but to shut the company’s doors. That is, of course, if they are unable to find a suitable method to generate cash. Receivables financing is one option.

How an A/R Financing can Help Your Business

When a company utilizes account receivables financing, they are mainly selling their outstanding invoices for immediate cash. Instead of waiting 30 to 90 days for their clients to pay their bills, they will be able to generate capital in a matter of days. Sometimes even as little as 24 hours.

Factors are companies that purchase quality receivables. If a company has clients with excellent or even outstanding credit, the chances are that they will be able to find a Factor willing to buy them. Purchases are made uniformly and at a discounted rate. This is typically 10% to 30% less than what they are worth. The remainder of the invoices’ value will be received by the company that sold them after the Factor collects them.

After the Factor purchases the invoices, all outstanding payments will be sent to them. The original payment arrangements will remain the same. After the payment of invoices, all monies go back to the company that originally owned them. That is except for the Factor’s fees and any money that already went toward the purchase of the invoices.

While accounts receivables financing isn’t for every company, however, it is an excellent option for many. Businesses that invoice their clients but can’t afford to wait 30 to 90 days to receive payment may find that this is what they need. An avenue sort of commercial financing is to keep their doors open or to invest in their growth. It allows them to do both without taking on risky debt or jumping through hoops to generate the necessary capital.

  • Get Cash Today

    Best Factoring CompanyGet the Cash You Need Today

    Just fill out this quick & easy form!

  • This field is for validation purposes and should be left unchanged.
Get Cash Today
  • Quick Contact Form
  • This field is for validation purposes and should be left unchanged.

Back to Top

Best Factoring Company

Get Started Immediately