Paragon Financial Group is funding during the COVID-19 crisis.

What is Accounts Receivable (A/R) Financing?

Accounts Receivable Financing is when a business sells its A/R (accounts receivable) to a factoring company and receives short-term business funding in return. The process is a speedy and efficient way for a company to secure working capital. Factoring is the best option since obtaining a bank loan is a near-impossible route. The company can get up to 90% of the invoice amount advanced to them. Receivable financing is an excellent way for the unbankable to obtain business funding fast.

What is Accounts Receivable (AR) Financing

What is Accounts Receivable Financing?

The factoring company looks at the credit of the companies client, not their credit. A/R funding is a great option for companies doing business with solid, creditworthy clients. Businesses that have IRS issues, client concentration, startups, minority-owned businesses, and other challenging funding situations benefit greatly from accounts receivable financing. These companies should be making $25,000 or more per month in revenue for approval of A/R financing. Keeping in mind that the company can be making less. However, if the accounts receivable funding package creates a situation where they will be bringing in $25,000 or more, that will qualify them as well.

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What is Accounts Receivable (A/R) Financing?

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Uncollected invoices have been purchased and sold for some time in the history of business funding. It is more effective than ever and is an excellent option for many companies in all types of industries. These industries may include staffing, oil and gas, medical, and many more. Selling unpaid invoices is a way for a company to get immediate cash without using its assets as collateral. One cannot say the same when filing for a loan. Traditional loans put a company’s assets at risk if the company is not able to repay it.

After selling the invoices to the factor, the factoring company handles all of the collection duties with a soft touch. For obvious reasons, it’s essential to keep good ongoing relationships with all parties involved. A factoring company should not be an aggressive ‘collection agency’ but a valued business partner.

A business may use A/R financing to purchase much-needed inventory, equipment, raw material, cover operational expenses, or meet payroll. Companies can use the money to grow and expand the company in a myriad of ways. The working capital might include funding additional product lines or pay for bigger advertising campaigns.

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