What Is Accounts Receivable Financing and How Does It Work?
One key to growing your business successfully is maintaining financial stability. For most businesses, due to the likelihood of changes and unexpected expenses or events, cash flow is a common struggle. It is wise to be prepared for the unexpected with a reliable solution to ensure sufficient working capital ongoing.
With most payment cycles, you can expect to wait anywhere from 30 to 90 days for payment, while late payments can further challenge your liquidity. Instead of hoping that your invoices are received on time or struggling with receivable delays and volatility, accounts receivable financing may be the answer to get you the money you need now.
By securing immediate payment, subject to the strength of your vendors and other factors, you typically receive cash for between 70% and 90% of your receivable balances. Cash can be paid in as little as one day from approval. Expedited cash flow can allow you to invest in your business sooner, pay off debts and/or capitalize on sudden investment opportunities. Another favorable aspect of accounts receivable financing is that you typically relinquish the task of collecting customer payments.
Accounts receivable financing also does not rely on your personal or business credit score. The lender focuses on your customer’s credit score and financial strength, which may make approval more likely. Whether you have no credit score or a low credit score, you may still be eligible for this financing option.
Another favorable aspect of this financing solution is that you are not tied to extended loan maturities nor taking on more financing than you need. Only finance the amount of your receivables to support your projected cash flow. Whether you quickly require payment on a single, large contract or need a larger advance on your income for a few months, the choice is yours as most lenders do not require an extended contract or a minimum number of receivables.
Learn more about this flexible and convenient financing solution today and enjoy higher levels of working capital without resorting to higher interest rate credit cards or lengthy loan terms.