Starting or expanding your business can seem impossible to do unless you’re willing to take on debt. Unfortunately, the chances of being approved for a business loan from a bank are getting slimmer all the time. While you may be willing to incur debt, bankers are less willing to lend money to new business owners or those with any type of blemish in their credit history whatsoever. Accounts receivable financing can make an attractive alternative in this case.
How to Get the Money Your Business Needs with Accounts Receivable Financing
It can seem like your business has plenty of money when you look at the invoices that customers owe you. However, your terms with the customer mean that you may not see any of the funds for 90 days or longer. Rather than wait for the funds and see opportunities pass by in the meantime, you can put your unpaid invoices to work for you in the form of accounts receivable financing. This is also known as factoring.
The key to success with this alternative method of financing is to select invoices with the highest values and from the best customers known to pay on time. You then sell these invoices to a third-party factoring company and receive most of the face value of the invoice right away. The invoice buyer holds out some of the value to cover its fees and may charge interest until it collects from your customer as well. That company becomes the new owner of the invoice and handles all collection efforts.
The amount of cash you can receive upfront typically ranges from 70 to 90 percent of the invoice value. This type of loan is far easier to qualify for than a bank loan and does not require you to take on debt you may not be able to repay later.
Interested in discussing accounts receivable financing further? Contact All Things Commercial Capital today.