Why Accounts Receivable Financing Could Work for Your Business
Despite your best efforts, most diligent work and most careful planning, you can’t always avoid financial struggles in your business. Though you do your best to prevent these challenges from occurring, financial difficulties are a reality for many people and companies. When cash flow is short, you have options. Rather than obtain a loan, you should consider accounts receivable financing. This popular method can help in many ways and has advantages over traditional sources. Here’s why your business should think strongly about it.
Sometimes called factoring, this method of financial help allows your business to sell its accounts receivable to a third party company, known as a factor, at discount rate. The factor then assumes all the risk and obligations of collecting on the accounts, while you receive an agreed-upon sum of money.
One of the first obvious advantages of accounts receivable financing is that you get an immediate boost to our cash flow. Unlike traditional loans where the process might take weeks or even months, with this method, the factor’s payment could be in your account in a day or two. Imagine the convenience of having access to the cash in such as short period that you can then use to meet payroll obligations, make office improvements or make necessary upgrades with equipment and machinery.
Also, when you use accounts receivable financing you no longer have to spend time collecting on delinquent accounts or dealing with the stress of trying to rack down payments. This will free up considerable time and resources that you can now devote to important activities such as marketing or sales. You can also divert employees you once had in accounts receivable and place them in other positions that will help in improving the company’s bottom line.
The process of qualifying for factoring is quick and easy. Traditional lending requires you to furnish a financial institution with a load of paperwork and other documentation. The process can be cumbersome and full of hassles and delays. However, factoring is simple, as the entire process can be wrapped up in a day.
Factoring works well with many types of businesses, regardless of the industry in which you operate. Manufacturing companies love to employ this method, but it might make sense to you no matter what your products and services may be.
Consider accounts receivable financing for your business needs. You’ll love the headache-free qualifying and the many ways in which it can help your business get back on its feet.