At some point in their growth, many small businesses need additional funding to be able to continue to prosper. With accounts receivable financing, you sell your unpaid invoices to a factoring company and receive the infusion of finances that you need to maintain a strong cash balance and continue to operate at full capacity. Here are some of the main benefits that account receivable financing can offer your company.
Receive Funding Quickly
If you come across an unexpected business opportunity or face a sudden emergency, you generally need extra cash right away. However, even if you qualify for a traditional bank loan or line of credit, the process of acquiring it can be long and arduous. When you apply for accounts receivable financing, you can receive a decision in as little as a few days and obtain the funds you need soon afterward. After the first factoring experience, the process is even quicker.
Traditional loans lock your business into debts with accumulating interest for long periods of time. On the other hand, accounts receivable financing does not involve debt at all. Instead, you sell your invoices to a factoring company, and after you receive the working capital you need, there is nothing to pay back.
Use Invoices as Collateral
When you take out traditional loans, you risk your business by putting up valuable assets as collateral. With accounts receivable financing, though, the invoices that you sell to the factoring company function as the collateral and your other assets are safe.
Obtain Funding Without Strong Credit
Some businesses without strong credit ratings find it difficult to secure traditional loans. This is generally not a problem with accounts receivable financing. Factoring companies are more concerned with the credit ratings of your customers than with your company’s rating. Even new businesses that have not yet had time to acquire a strong credit rating can obtain financing through factoring.
For more advice on accounts receivable financing, get in touch with Grecco Capital.