So, you need working capital to sustain and grow your business? Clearly, the lack of cash or poor cash flow can have a significant impact on the vitality of every business. When it comes to securing needed cash, there are many sources available including traditional bank or credit union loans, commercial real estate loans, lines of credit, SBA loans, merchant cash advances, equipment financing, and accounts receivable financing. Many of these can’t be processed quickly and may have tight requirements for funding. For more rapid cash flow, accounts receivable financing may be the right solution.
What Is Accounts Receivable Financing?
Accounts receivable financing also called invoice financing or factoring is simply the sale of a company’s accounts receivable assets to a third-party financier or “factor” who then collects funds directly from the customer. The business receives a percentage of the value of the receivables right upfront and receives the balance, less the factor’s service fee when the full invoice is collected from the customer.
What Are the Benefits of Accounts Receivable Financing?
Accounts Receivable Financing provides a way for a company to get quicker access to cash without the requirements and longer waiting periods of other types of business loans. And, there is no need to worry about interest payments or repayment schedules. This can be a great asset for a new business or one dealing with setbacks because there is no credit history required. Companies can use accounts receivable financing even if they are dealing with a tax lien or are in Chapter 11 bankruptcy.
Factors Affecting the Quality of Receivables
A factoring company will consider these aspects in taking on the accounts receivable financing:
- The industry of the company initiating the receivables to be financed.
- The age of the receivables.
- The creditworthiness of the customers to be collected from.
- The quality of documentation.
Seek Expert Financing Assistance
Contact TopFund Capital, based in Cleveland, OH, for a range of commercial finance products to help businesses succeed. All come with competitive rates, generous terms, and superior customer service.