Simple Guide on Receivable Financing

A lot of business owners lack on one thing when they are operating their business – obtaining knowledge. There are a lot of options given to you if you only give it a chance. You must be struggling in obtaining the funding for your working capital so that your business can grow the way you expect it to grow. You are aware that banks are already cutting back and limiting their lines of credit and loans but there is still another option you could take such as receivable financing.

You might wonder what accounts receivable financing is and how it can help you and your business expand and flourish. This type of financing means that you sell all your outstanding invoices or accounts receivables to a finance company, which will generally provide quick cash flow for your business. The risks associated with the outstanding invoices or receivables are transferred to the finance company where you sold them into.

Most finance companies will pay a discounted amount depending on the receivable ages. They usually don’t accept those that are past due or more than 90 days old. Therefore, you should sell your outstanding invoices only if they are still within payment period or within 90 days. There are three primary advantages associated with this form of financing and they generally include:

1. The risk associated and the collection of debts is no longer your responsibility since you are transferring it to the financing company’s hands. You will then be able to focus on more important matters such as on activities that are productive in every way. You will also receive a fixed amount of fund from the receivable financing to add to your working capital so that you don’t have to face any issues should your clients fail to pay up.

2. You would also be able to free up some working capital so that you have backup finances. This will allow you to free up some money for other important expenses and keep the money flow regular and consistent. The accounts receivable financing is by far the easiest way you could obtain quick cash from outstanding invoices that your company has.

3. As previously mentioned, accounts receivable financing is the quickest way of obtaining money that you can add to your working capital. You are freed from the headache of collecting everything that were owed to you.