As a small business owner, you need to time to earn loyal customers, and inevitably, you have to extend credit when requested. While this is a good way to enhance brand goodwill among customers, it also means reduced cash flow for your business. Accounts receivable financing is the process of selling unpaid invoices at a discount in return for immediate funds. This is one of the best ways to get a small loan, without impacting your assets and balance sheet. Check some of the quick facts below.
Considering accounts receivable financing
Otherwise also known as invoice financing, accounts receivable financing is one of the best ways to induce cash flow into the business when you need it the most. There are factoring companies, which offer such financing services, and they will take over the invoices for a charge. You need to find a reliable factoring service and submit your pending invoices. They will do what it takes to check and verify the creditworthiness of your clients, and depending on the terms and conditions of the contract, you can get anywhere between 70 and 90 percent of the pending bills. The remaining balance will be paid when your customers pay their bills, after deducting a charge.
Things to note
While accounts receivable financing is an effective way of getting a quick loan with interest, you have to be careful about the choice of the factoring service. Take your time to read the terms and conditions, which can be complicated at times. Also, you will have to pay a hefty fee for their services, and that may reduce your profits. Experts recommend accounts receivable financing for new and emerging companies that are trying to find a foothold in the industry. It is also wise to check the policies of the factoring service with regards to debt collection, because you wouldn’t want to alienate your customers.
There is no denying that accounts receivable financing is a boon for smaller and growing businesses. The benefits surely surpass the cons, as long as you are working with a reliable factoring company. In most cases, you will get the amount within two to three working days, which is a huge relief, especially if your bills are paying after a long time. Check online now to find more details, and always consider your financial situation before taking any kind or loan or opting for accounts receivable financing.