The Basics of Accounts Receivable Financing

If you’re the owner of a small business, you know how important consistent cash flow is to keeping your company running smoothly. Sometimes, though, you may have outstanding invoices but need revenue soon. If this is the case, you may want to consider accounts receivable financing, or AR financing. This is a simple funding option that allows you to use your accounts receivable as collateral. Since customers could take 30 or even 90 days to send payment after receiving your invoice, using your assets could help raise much-needed funds to keep operations going in the meantime. With AR financing, you’re sure to find an option that suits your business needs. To learn more about this financing route and the benefits it could provide your company, read on.

Your Accounts Receivable Act as Collateral

If you’re considering getting AR financing, you’ll want to start at a bank, asset-based lender, factoring company or other financial institution. There, you can sell your AR at a discounted rate in exchange for immediate funds. You can then use this early payment to cover any necessary expenses until your customers pay their invoices. Keep in mind, though, that depending on the lender, there many be certain fees involved, so you’ll want to verify the details of the agreement before committing.

It’s Used in Several Industries

Regardless of the industry you’re in, there’s a good chance accounts receivable financing is an option for you, given its status as a standard business practice in many niches. Whether you’re in manufacturing, transportation, textiles or another sector, you may be able to leverage your AR. In fact, this is one type of lending where the age and size of your business probably won’t impact your eligibility.

It Helps Your Cash Flow

In order for your operations to run smoothly and your business to thrive, you need a consistent cash flow. If you need help reaching your working capital requirements, this could be a simple solution that allows you to focus on completing more orders and growing your business.

If your business needs funds right away and has outstanding invoices, consider using those assets to raise funding immediately. Accounts receivable financing allows you to continue to cover your expenses, pay employees, start new orders, and more before your customers send a payment for their invoices. If you’re struggling with cash flow and want to leverage your assets, AR financing could be the right choice for your business.

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