7 Reasons for Using Accounts Receivable Financing

Posted at December 28, 2020 » By : » Categories : Business Funding »
accounts receivable

As a small business owner, you realize that sometimes your visions are much bigger than your wallet. But that’s not a sign that your vision is too large. It’s simply a sign that it’s time to partner with an accounts receivable financing company.

The reality is, sometimes you can’t grow your business using your own financial resources. Or, maybe you’re in a situation where making payroll is tough to do on your own right now.

Either way, accounts receivable financing, or “AR financing”, may be the solution to your cash flow constraints.

Here are seven reasons why your business could benefit by using an accounts receivable financing company. Let’s jump in!

1. Quick Funding by Using Accounts Receivable Financing

One of the biggest reasons to take advantage of accounts receivable financing is that you can generally expect your cash quickly.

If you apply for a business loan from a bank, the application process can be complicated and extremely slow. You’ll have to provide large amounts of paperwork, legal documents, financials, etc.

In addition, it may take weeks or even months for the bank to make a decision. When you finally receive your funding from the bank, the opportunity that you needed it for may have already passed.

However, when you choose AR financing, you can receive your loan approval decision rather quickly. That’s because the lenders that offer this type of financing simply need to verify your company’s unpaid invoices and the credit score of your clients.

This type of financing puts you in the best position to take full advantage of the business opportunities facing you. AR financing is a quick and easy way for you to take advantage of having good creditworthy clients who pay their invoices on time.

2. Your Company’s Credit is Not Important

Another reason to use accounts receivable financing is that this type of financing isn’t based on your company’s credit score. Instead, as we mentioned above, it is mostly based on the credit of your clients.

When you decide to sell to a lender your business’s accounts receivable, the lender will focus on scrutinizing your clients rather than you. In light of the above, accounts receivable financing is an excellent solution if you prefer to keep your credit score out of the spotlight.

3. Accounts Receivable Serves as the Collateral

Accounts receivable financing also offers the benefit of requiring no upfront collateral to secure the loan. Banks usually want collateral before they lend you money.

However, if you have leveraged your assets, like your building, for collateral in the past, you may have no more collateral to offer. Fortunately, with accounts receivable financing, your unpaid accounts receivable and your future invoices serve as your collateral.

An accounts receivable financing company will evaluate your invoices to see how much risk is involved with them. They will also check the credit of your clients whose invoices you want to fund. Then, if they like what they see, they’ll purchase the invoices from you.

4. Financial Stability

Yet another reason to go with accounts receivable financing is that it’ll increase your cash flow which will give you time to balance your income and expenses. As a result, it can help you to feel more financially stable.

The truth is, having cash available is critical for operating your company. You need cash to cover your operating expenses such as rent, office supplies, insurance, payroll, and payroll taxes.

With AR financing, you can speed up the flow of cash coming into your bank account, rather than waiting for your invoices to be paid. And this can help you to enjoy the peace that comes with being able to pay your employees and bills on time.

5. No Debt Challenges Due to Accounts Receivable Financing

AR financing is also attractive in that it is a popular alternative to going into a greater amount of debt. When you decide to sell your invoices to an accounts receivable financing company, you won’t actually accrue more debt.

This is quite a bit different than if you were to take on a business loan from a bank. A business loan from a bank almost always involves you taking on more debt, one way or the other.

Accounts receivable financing is especially beneficial if you already have too high of a ratio of debt to income. When used correctly, this type of financing can help you to meet your financial goals without sending you further into debt.

6. Taking Advantage of Business Opportunities

As we mentioned earlier, what’s great about accounts receivable financing is that you don’t have to pass up on a wide variety of business opportunities that may present themselves in the near future. What types of opportunities?

For starters, AR financing may enable you to complete new marketing and sales initiatives that you otherwise couldn’t afford to begin. You can also use AR financing to capitalize on expansion opportunities.

In addition, this form of financing can come in handy for going after new clients or buying extra inventory. In other words, accounts receivable financing can help you to elevate your business and boost your bottom line like never before in the upcoming months.

7. Decreasing Operating Expenses

Finally, a major advantage of using accounts receivable financing is that it can help you to reduce your company’s operating expenses. You can use the proceeds of your funding to pay some of your business expenses before they are due.

This may make you eligible for attractive discounts for early payments. In the end, AR financing can help you to save money, which, in turn, can be used to make more money.

How We Can Help You with Accounts Receivable Financing

If you’re looking for accounts receivable financing, we’ve got you covered. You can easily fill out our free online application for a business loan and this simple application process won’t impact your credit score.

Once your application has been submitted and reviewed, we will email you a few funding options that are available through our network of approved lenders. Multiple lenders who are interested in offering you a loan will compete for your business.

As a result, you can rest assured that you will receive the best interest rates and terms available. Then, once you’re approved for accounts receivable financing, your funding will soon be on the way.

Get in touch with us to learn more about how we can help you to take your business to the next level today!