Accounts Receivable Financing
Accounts receivable financing, also referred to as factoring receivables or AR financing, offers businesses a flexible alternative to traditional funding options.
Benefits of Factoring Receivables
Working capital that is gained through AR financing, bridges the cash flow gap so there is no disruption to a business’s everyday operations. AR financing also lets business owners explore potential opportunities for growth. This is done without being held back by long, drawn-out loan application processes with strict lending requirements. Working with accounts receivables financing companies is much easier than trying to obtain a loan from a bank. Accounts receivable financing is based on your receivables which are used as collateral to secure AR loans.
Accounts Receivable May Be Used as a Source of Financing by:
AR financing is a popular, debt-free alternative to bank loans and other funding options. Here is a great post on our blog to help you learn more. Or you can call 888-782-0348 to speak with an AR financing advisor today!
Working with reputable accounts receivable financing companies is paramount to seeing great success with this type of working capital loan. The following information outlines everything needed to find the best AR financing options for your business.
- Businesses experiencing seasonal dips in working capital
- Companies needing an increase in short-term cash flow to overcome challenges
- Businesses that are experiencing growth
- Startups wanting to bring on more talented professionals
- Or simply any business looking to create a financial buffer and improve their cash flow
Accounts Receivable Financing is Based on Your Unpaid Invoices
Invoice payment terms typically fall somewhere between 30, 60, 90, or even 120-days. However, the agreed upon payment terms do not always mean your customers will pay their invoices on time, most don't.
Delays in paying invoices are common which means invoices will typically stretch out past their due date.
Business owners may not want to stress relationships by hounding customers with collections calls. This is where accounts receivable financing comes into play.
AR Financing 101
An accounts receivable financing company purchases your invoices and advances you money for most of the invoiced amount. The total amount you are advanced varies among accounts receivable financing companies. It could be as high as 100% of the invoiced amount but is usually between 80% - 97%.
AR Financing Fees
The fee for accounts receivable financing is based on how long an invoice takes to get paid. AR financing depends heavily on the types of clients you deal with and whether they have a history of being reliable when paying their invoices on time. The quicker your invoices are paid, the less in AR financing fees you pay.
Collateral for Financing Receivables
AR financing is often easier to qualify for than most other forms of business financing. Your invoices are the collateral, meaning your business already has leverage when going into negotiations with a potential accounts receivable financing company.
Having a strong invoice aging report gives you more options when you are speaking with accounts receivable financing companies. Before you begin this process, it is advisable to make sure your invoice aging report is current and in good shape.
Benefits of AR Loans
The benefit of AR loans means no more having to wait 30, 60, 90, or even 120 days for your customers to finally pay you for the services or products you provided them with.
The funds are typically sent to you and deposited directly into your bank account either by wire transfer or ACH deposit. This type of financing provides your business with the capital it needs. This allows you to explore great opportunities for growth, or invest in valuable company resources.
Accounts Receivable Financing and How Factoring Receivables Works
The allure of accounts receivable financing is found in its easy and fast process.
Many business owners find that AR financing provides ample time to balance expenses and income. It also gives them a sense of financial stability.
Here is how AR financing typically works:
- You provide your customer with a service or product
- You submit the invoice you provided to your customer to the factoring company
- Your factoring company advances a percentage of the total amount due on the invoice
- Your customer pays your factoring company the money they owe for the invoice
- Whatever percentage of the invoice that your factoring company did not already advance you, they will send to you minus a small financing fee
When working with a top-tier accounts receivable factoring company, the process of being approved and receiving your money is quick and painless. Often, business owners with creditworthy customers can be approved by factoring companies within a couple of days after submitting their application.
The Advantages and Disadvantages of AR Financing
Our goal at Your FundingTree is helping you make an informed decision about financing.
You should know that AR financing carries several advantages and disadvantages. This all depends on your business, how it operates, and the clients you work with.
- Simple application process with quick turnaround time
- No impact to your business's credit and your unpaid invoices are the only collateral needed to secure the AR financing loan
- Scalable funding options depending on invoice size and the types of clients you work with; you have the ability to control how much you fund with an AR financing company
The disadvantages of AR financing:
- Success entirely depends on your clients’ reliability and how long it takes them to pay their invoices
- Higher fees than funding options like a business lines of credit
- Could place stress on customer relationships you have built due to some clients not wanting to deal with an accounts receivable financing company, but this is not common
How to Increase Cash Flow with AR Financing
Having business capital tied to invoicing is often stressful.
Anything can happen that influences whether your clients can pay on time. Yet, you cannot risk business operations by giving too much leeway on when invoices get paid.
How does AR financing improve your cash flow? Consider the following.
Increase Cash Flow
Invoice financing offers short-term cash flow needed to avoid dips in business performance. It also offers capital to take advantage of exciting business investments and resources.
If you improve cash flow, it will help your business with:
- Seasonal fluctuations and the sudden need for more inventory or employees
- Capitalizing on supplier discounts and promotions
- Building a stronger buffer when dealing with industries that have periodic periods of downtime
The quick financial solution provided by AR financing is a fantastic option for sustainability.
You do not need to worry about trying to qualify for (or repay) loans from banks. This means faster funding and better cash flow.
Even though accounts receivable financing is sometimes referred to as an accounts receivable loan, AR financing is not necessarily a loan. You will not have to take on additional liabilities, so you will always have a better-looking balance sheet. This is great if you have other assets and need to explore additional funding options beyond AR financing!
Free Up Resources
Every extra minute your team is pulled away from their tasks to deal with a client’s outstanding invoice is time that could be better used elsewhere. Worse, this back-and-forth could cause tension that disrupts the services or products you are providing to your client. If this happens, it will create a chain reaction of negative outcomes.
Invoice financing cuts out the troubles and lets your team focus on what matters.
Using an AR financing company is a great resource for funding but it can also be used as a source for helping with collections.
When it comes to collections, some clients are difficult and hard to deal with.
Clients could become even more difficult once their finances come into the equation. This is a lot of weight on your shoulders on top of the already stressful day-to-day operations.
An accounts receivable financing company is like your buffer between you and your client.
The AR financing company will deal with them directly. This is a great option if you are not the type to confront people nor want to take on the risk of ruining a relationship with a client.
Working capital offers the ability to explore all those great business ideas.
With accounts receivable financing, you do not need to worry about getting bank approval. You can capitalize on growth opportunities immediately after being approved for funding.
Your FundingTree is the best accounts receivable financing source for you.
If your business is high-growth, fast-moving, a start-up, or an organization that is experiencing financial challenges, we are here for you. We have decades of experience helping businesses, like yours, get the capital you need to continue seeing success.
Accounts Receivable Financing vs Factoring Accounts Receivable
Business owners who are looking into AR Financing will also discover AR factoring.
These two styles of business loans are closely related, but there are important differences. The main differences are: 1) who handles customer payment; and 2) the loan structure.
Accounts Receivable Financing
Accounts receivable financing can be referred to as “invoice financing.”
Invoice financing allows a business to establish a type of line of credit, based on the business’s outstanding invoices. Accounts receivable financing is a line of credit that the business can draw on. This makes the whole funding process more flexible. The business usually continues to collect payments directly from the business’s customers.
Invoice financing often requires the business to meet certain standards for qualification.
After the invoices have been verified, the funding company will typically advance 85% to 100% of the invoiced amount to the business. The funding company will also apply a financing fee of between 1% to 4%.
The advanced amount will usually be net of some of the financing fees.
Factoring Accounts Receivable
Factoring accounts receivable sometimes is referred to as “invoice factoring.”
With invoice factoring, a company called the “factoring company” will handle the collection of the invoice payments they are financing. This means the factoring company will now interact with a business’s customers for all payments of the factored invoices.
- Both options (invoice financing and invoice factoring) advance funds based on a percentage of the value of the accounts receivable.
- Both options charge almost the same financing fees.
The funds are typically advanced net some of the financing fees for either option.
Additional Information about Factoring Accounts Receivable
This process (invoice factoring) is where a factoring company purchases your accounts receivable for 85% to 100% of its value. Once the accounts receivable has been bought, the factoring company will assume the responsibility of collecting all payments from your customers.
The factoring company often charges a specific fee for its services. This factoring fee typically ranges from 1% to 4% of the accounts receivable’s value.
- You can decide to sell your entire accounts receivable – or not to sell any of it.
- You can also choose which outstanding invoices to factor.
It is best to only use accounts receivable factoring after you have done your due diligence. It’s advisable to always work with an experienced and respected factoring company.
Your FundingTree can help prepare you and your business for the switch from your current invoicing and collections, to accounts receivable factoring. Your FundingTree will be the seamless solution for you, your business, and your customers.
Why Use Your FundingTree for Accounts Receivable Financing
At Your FundingTree, we serve many types of commercial businesses: manufacturing, staffing, transportation, security, retail, medical, construction, and many more.
Your FundingTree is here to help any business large or small.….be it well established with multiple offices or a startup business.
Your FundingTree can easily provide you with accounts receivable financing. We offer AR factoring solutions that will best suit you and your business. Our financial advisors are ready to help. Please let our team become your business partner and help support you and your business to even greater heights of success.
Here are some additional reasons why you should partner with us:
- Invoice advance rates as high as 100%
- Factoring rates as low as 1%
- Quick, easy, and free online application
- Same day funding options available
- Invoice factoring for most types of industries
- Lender to lender financing is available
The process is rather simple and quite smooth once you begin working with an accounts receivable funding company. Your FundingTree makes that a reality.
If you are ready get started, then fill out our free 90-second online application today!
Here is a typical process when applying for AR financing through Your FundingTree:
- Decide which type of financing your business needs, or have a financial advisor from Your FundingTree make the recommendation
- Submit a simple online application to Your FundingTree and immediately one of our financial advisors will reach out to you so we better understand your goals
- We’ll search and compare every lending opportunity within our marketplace to find the best AR funding options tailored to your business’s needs
- We will then introduce you to multiple lenders who are interested in offering you accounts receivable financing
- Once you receive loan proposals from any of the lenders, your financial advisor is available to help you choose the best lender for you and your business
Finding Success by Factoring Receivables
Improve your chances of being approved when applying for (and receiving) accounts receivable financing solutions
An accounts receivable financing application process may seem like a whirlwind of activity.
You could have the advanced funds deposited into your business’s bank account within a day or two after being approved for funding. It is best to carefully prepare everything a lender requests, so that the application process progresses as smoothly as possible. Underwriters want to see applicants who are honest and well organized.
Know That You are an Ideal Candidate
The ideal candidate for accounts receivable funding are those expecting cash flow problems tied to delays with their invoices being paid. This is also ideal when there is a need to make a quick decision to see your business capitalize on an opportunity for growth.
Accounts receivable funding solutions are also great alternatives to other business loans that may carry higher qualifications. We suggest you speak with one of our financial advisors to learn how accounts receivable funding aligns with your business’s needs.
Strive for Transparency and Openness
A tailored funding solution requires knowing the details of your business’s operations.
The lenders in our marketplace will require detailed information about your business. Besides the basics like business structure and ownership, you will be asked to provide financial documents, and invoicing details.
Transparency during underwriting with the financial documents you submit to a lender could result in you receiving a better loan proposal. This might help you receive lower rates and better terms in the loan agreement, making your business’s funding fast, flexible, and affordable.
Pick and Choose Which Invoices You Want to Fund
AR financing does not require reapplying for funding and services every time you need financing. This makes it an easy option to use when your business has cash flow problems.
You will want to conduct proper due diligence and make sure the clients whose invoices you want to finance have a good credit and a reputation of paying their invoices on time.
Accounts Receivable Financing Alternatives
Explore the business funding types that align with your company’s financial goals, needs, and purpose
Your FundingTree offers multiple types of business loans and business services. Get in touch with one of our friendly AR financing advisors to discuss your business’s funding needs. Call 888-782-0348 and improve your cash flow today!
Our business funding and business services are ideal for all industry types, from manufacturing and construction to staffing and trucking. Our online marketplace and expertise connect you to the best business funding for your company’s financial goals, needs, and purpose.
You are more than welcome to apply for more than one business loan, too!
We accommodate business owners that have multiple businesses of all sizes and types.
We’ll connect you with lenders who are interested in funding your business. In the end, you’ll have the financing you need, at affordable rates, favorable terms, and great customer service.
We are the #1 Choice to Help Increase Cash Flow with Accounts Receivable Financing
Your FundingTree is where banks and other lenders compete against one another to finance your receivables. This means you will receive lower rates, more favorable terms, and better customer service.
Our business funding solutions and business services have been featured nationwide by broadcasters like ABC, CBS, FOX, and NBC, highlighting our outstanding work. Also, by having an A+ rating with the Better Business Bureau, this goes to show how much our previous customers have been satisfied with the services we provided them with.
Our 90-Second Accounts Receivable Finance Application
It takes less than 2 minutes to submit a free online application for accounts receivable financing
A more profitable, sustainable business begins here!
In as little as 90-seconds, you can submit a business loan application to Your FundingTree.
- Company type and the industry you are in such as staffing, trucking, manufacturing, etc.
- Preferred type of financing for your business
- Desired business loan amount
- Indicate which business services you might be interested in (if any)
Our financial experts use decades of experience and knowledge combined with technology to process your application. Your loan application has no obligations, nor does it impact your personal and/or business credit score.
Why waste time sorting through dozens of loan applications? Time is valuable!
Your FundingTree makes an accounts receivable financing application as quick and easy as it can get! You will receive several loan proposals that align with your company’s financial goals.
Are you ready to elevate your business’s operations and opportunities for growth? Apply today!