Accounts receivable financing is often referred to as factoring, and it’s one of the oldest kinds of financing available to commercial enterprises. Basically, it involves selling all or many of your invoices to a factoring company, in exchange for an upfront sum of cash that is equivalent to something like 80% of their cash value. There are several benefits to becoming involved with accounts receivable financing, and these are powerful motivators that might convince you to get involved.
Accounts receivable financing can be approved much more frequently than bank loans, and there’s a good reason for that. The creditworthiness of your business doesn’t come into play nearly as much as the prompt payment habits of your customers. A factoring company will be much more interested in the fact that your customers pay quickly, rather than what your business credit score is.
If your business has problems with cash flow, especially because you have to wait 60 or 90 days for customers to pay, you’ll love the fact that you can literally be paid for an invoice almost as soon as it gets generated. When you don’t have to wait for incoming revenue for several months, your cash flow issues will literally evaporate, and you will have a steady flow of incoming cash.
No Bill Collections
When you sell your invoices to a factoring company, that means you are no longer responsible for tracking down your customers for payments. That responsibility actually falls to the factor who purchased your invoices. Since this is the case, you won’t have to dedicate personnel in your company to making constant phone calls to get customers to pay. In fact, you might be able to completely do away with your collections department, and reassign employees to do more valuable business functions.
Would A/R Financing Help Your Small Business?
Chances are it would, especially if you have a high volume of invoices each month. Contact us at Lionheart Commercial Capital so we can discuss setting you up on Accounts Receivable financing.