Why Accounts Receivable Financing Might be Just What You’re Looking For
If you’re business is going through some financial struggles, and you need some help getting back on track, you’ve got several options. You can certainly seek a traditional business loan from a financial institution. However, the qualification process can be long and sometimes challenging. Many businesses turn to accounts receivable financing for a quick lump sum of cash. Though this method might not be for every business, there are some distinct advantages that might intrigue you based on your current situation and needs.
In this financial assistance option, sometimes called factoring, you would sell your outstanding accounts receivable to a third party known as a factor. The factor would pay you a sum of money in return for the rights to collect the money from the company that previously owed you money. Instead of getting paid by your customers, you receive a one-time payment from the factor, and the party that owed you now answers to the factor.
No More Collecting Issues
Your accounting department has enough on its plate, but spending time trying to collect on delinquent customers can be frustrating and sometimes even fruitless. Your business spends a lot of resources and energy making phone calls and sending invoices to late-paying customers. Wouldn’t it be nice to not have this worry and be able to focus on other facets of your business? With accounts receivable financing, you turn these responsibilities over to the factor.
If you’re in a financial pinch and need some cash in a hurry to make payroll, purchase equipment or supplies, or pay off debt, you’ll appreciate factoring. Approval can be as quick as one day, and you can even have funds in your account another day later.
Unlike some types of traditional loans, you don’t need to put up any collateral against factoring. This way, you don’t risk losing personal property such as a car or home if you’re unable to repay the debt.
When you go this route, you can focus your efforts on other important areas of your business because you no longer have to collect money from customers. You may now be able to bolster sales and marketing departments, or you may be able to save money on manpower by eliminating positions you no longer require.
Accounts receivable financing is a time-effective method to acquiring the cash you need. Take a look at your business and evaluate whether this option is right for you at this time.