Accounts Receivable Financing and Invoice Factoring
We help growing businesses by offering them accounts receivable financing (AR financing) or accounts receivable factoring, and it is a free application.
Accounts Receivable Financing is a well-proven, effective source of working capital that helps companies improve cash flow, expand their business and increase their profitability. Accounts receivable financing gives businesses the opportunity to sell their unpaid invoices at a discount in exchange for immediate cash.
This type of financing is a popular, debt-free alternative. AR financing is commonly used instead of bank loans and is by far, less costly than having to borrow from an online lender or cash advance company. Instead of you having to wait weeks or months for your customers to finally pay their invoices, you can turn that potential revenue stuck in your accounts receivable into immediate cash sitting in your bank account. Every day, hundreds of thousands of people have their accounts receivable purchased by an accounts receivable factoring company who might advance them up to 98% of the invoiced amount.
How Accounts Receivable Financing Works
When you become a client of a factoring company, you have the ability to sell your invoices to them that are not yet due. The factoring company will quickly advance you the majority of the invoiced amount. No more waiting 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 you bank account either by wire transfer or ACH deposit
Both small and large businesses use accounts receivable financing in order to maintain steady revenue while waiting for their customers to pay. If you’re having problems with your cash being tied up in your accounts receivable and you want that money now, accounts receivable financing is an alternative worth exploring. This is a very viable option if you want to avoid the high interest rates of merchant cash advance sites, online lenders, and endless loan payments.
Accounts Receivable Factoring Steps:
- You provide your customer with a service or product
- You submit to your factoring company the invoice for the service or product that you provided to your customer
- Your factoring company will quickly advance you 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
Many professionals have found that accounts receivable financing has given them the time that they needed to balance their expenses and income as well as a sense of financial stability. The funding process is easy and fast.
When working with a top-tier accounts receivable factoring company, the process of being approved and receiving your money is quick and painless. Business owners with creditworthy customers can be approved by some factoring companies for accounts receivable financing within a couple of days after submitting their application.
The Benefits of Accounts Receivable Financing
Having cash on hand is vital to running your business. It’s required to pay your employees, vendors, rent, utilities, and more. When you speed up your cash flow through Accounts Receivable Financing, you’ll enjoy the peace of mind that you can pay bills on time and not worry about paying off another loan.
Whether you own a startup company or a long-established business, when you lack available funds, you not only jeopardize your company’s future, you also miss out on profitable opportunities.
Here’s a quick look at a few of the benefits of using Accounts Receivable Financing from a top-tier factoring company:
Benefits of Partnering with Your FundingTree:
- Improved Cash Flow and Working Capital – Instead of waiting for your customers to pay their invoices, factoring provides you immediate cash.
- Capitalize on Opportunities – With cash flow tied to your aging invoices, you can take advantage of growth opportunities, including new sales and marketing initiatives, equipment to meet expansion opportunities, securing new accounts, and purchasing additional inventory.
- Alternative to Loans or Borrowing – Many lenders avoid small to medium-sized companies, and especially young businesses, but startups need capital too! Factoring provides you with the funds you need to move forward (while other types of financing simply put limits on you).
- Reduced Operating Expenses – Use the cash to qualify for cash discounts from your suppliers and eliminate the added charges of the collection process.
- Improved or Strengthened Credit – With cash in hand, you can pay your bills, your payroll, and your taxes on time and reap the rewards of better credit scores and supplier discounts.
- Stronger Balance Sheet – Factoring isn’t a loan, so it doesn’t appear on your balance sheet as an expense. You get the benefit of the cash, without the drag on your balance sheet.
- Value-Added Services – Your factor will offer you professional bookkeeping and collection services, so you can get back to focusing on growing your business.
More About Accounts Receivable Financing and Accounts Receivable Factoring
The terms “accounts receivable financing” and “accounts receivable factoring” are often used interchangeably, but they’re really not the same thing. When you are looking into acquiring a business loan, it’s important to know that there are significant differences between these two business loan types.
What are the Significant Differences Between
Accounts Receivable Financing and
Accounts Receivable Factoring?
These two styles of business loans are also known as invoice financing and invoice factoring. They 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 is sometimes referred to as “invoice financing.” Invoice financing allows a business to establish a line of credit, based on the business’s outstanding invoices. Accounts receivable financing is a line of credit that the business can draw on, and it makes the whole process flexible. The business usually continues to collect payments directly from the business’s customers.
Invoice financing often requires the business to meet strict qualification standards. 85% to 100% of the account receivable is often advanced to the business upon approval. The financing company will also apply a fee of between 1% to 3%. The loan amount will usually be net of financing fees.
Accounts receivable factoring is sometimes 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. For both options, funds are advanced net of fees.
More about Accounts Receivable Factoring
This process (invoice factoring) is where a factoring company purchases your accounts receivable for 80% to 95% of its value. Once the accounts receivable has been bought, the factoring company will assume the responsibility of collecting all payments from the customers. The factoring company often charges a specific fee for its services. This consideration mostly ranges from 1% to 4% of the accounts receivable’s value. You can decide to sell your entire accounts receivable – or not to sell it. You can also choose which outstanding invoices to factor.
The risk factor, which is determined by other aspects of the factoring company’s process, will determine the fee. This means the prices vary, due to the risk factor. To determine the amount to be advanced, the net of factoring fees will be calculated.
Accounts receivable factoring needs to be done with a lot of care. It is advisable to always work with an experienced and respected factoring company. Your FundingTree is able to help prepare you and your business for the switch from regular invoicing and collections, to accounts receivable factoring. For example, you will want to update your customers about the accounts receivable factoring arrangement. Your FundingTree can be the seamless solution for you, your business, your customers, and your credit processes.
Detailed Benefits of Accounts Receivable Financing:
The benefits of accounts receivable financing are vast, but we will summarize many of the most important ones here for you:
- Working Capital
One of the greatest benefits of AR financing is improved working capital, and it is pronounced. You don’t need to wait for 30-, 60- 90- or 120-day pay cycles. With Your FundingTree, you get cash in your hands fast.
- Debt-Free Cash Flow
You don’t need to worry about trying to qualify for (or repay) loans from banks (or loan sharks for that matter). Even though accounts receivable financing is sometimes referred to as “accounts receivable loans”, invoice financing is not a loan per se’. Therefore, it will always lead to a cleaner balance sheet. You won’t have to take on additional liabilities, so you will always have a better-looking balance sheet.
- Improved Credit Score
As you don’t have to wait for days or months before you get your funds, you can always stay on top of your payables. In addition to the debt-free cash flow, you will still get significant advantages for your company’s credit score.
- Viable Alternative to Bank Loans
These days, regardless of the size (from start-ups to mature businesses), they often don’t have the credit or collateral profile to take out a loan. Plus, not all organizations are interested in making monthly loan payments. Your FundingTree offers fantastic alternatives to bank loans.
- Ease of Process
Our application process is simple and easy. You apply here, and once approved, then the ongoing invoice financing process will always be simple. This way, your line of credit will grow – without issue – and as fast as your company.
- Reasonable Fees
Think of any funding alternatives (business loans, cash advances, start-up funding). Accounts receivable financing fees are usually less expensive than other substitutes.
- Less Stress
You don’t need to worry! Your mind will always be at ease because you won’t have concerns about paying your bills or meeting payroll. With accounts receivable financing, you will be able to focus on all the operational parts of your business, and this will result in sustained success.
- Growth Opportunities
Once you increase your cash-flow, you can then grow your business and embrace expansion ideas. With accounts receivable financing, you don’t need to worry about getting bank approval, or risking your personal collateral, or downgrading your credit score, before you make your decisions and take action to grow!
- Funding Available to Startups and Higher Credit Risk Companies
Your FundingTree is the right accounts receivable financing (or accounts receivable factoring) 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, with decades of experience.
Who Should Use Accounts Receivable Financing or Factoring?
To make the best decision on which funding choice you should go for, let’s consider this scenario:
Company X had a net 60 for outstanding invoices. New customers started coming in, and this led to Company X ordering materials from suppliers. Unfortunately, the company could not afford the cash or credit to cover the cost of materials, and traditional financing options weren’t available at this point. Company X was left with no choice than to let go of its orders.
It is at this stage that AR financing or factoring comes into the picture and Company X can decide to go with any of the two options. Company X can sell enough of its unpaid invoices (factoring options) to fulfill its new customer orders and finance materials. This brings back working capital and allows Company X to keep growing.
Now the question is, which option is the right choice for your business?
To be successful like Company X, there are a few things that you need to consider. The decision may be simple, as you may qualify for one type of funding, and not the other. But you really should contact Your FundingTree, before making this important decision.
One way to look at accounts receivable factoring is this: you may consider it as an advantage that will allow you to place part of your collection process into the hands of another company that is great at that specific process. This would help free you to focus on business challenges that you’d rather focus on.
Or you may consider accounts receivable financing to have the advantage, as your business typically continues collection processes on your invoices, the financing takes place behind-the-scenes, and your customers are none the wiser.
You can also take a look at cost vs. value. You can check to see which of the two options values your account invoices or receivables highest, and which option comes with the lowest fees.
Once you do all the comparative research needed, you will be able to fully understand how your decision may affect your business. Don’t worry … if you don’t have time to do all that research, Your FundingTree has already done plenty of research and can quickly tell you which choice would work best for you and your business.
Why Choose Your FundingTree?
At Your FundingTree, we serve many types of commercial businesses: manufacturing, staffing, transportation, security, retail, and many more. Your FundingTree is here to help any business large or small … be it established or a startup business.
Your FundingTree is set up to easily provide the accounts receivable financing and AR factoring solution that would best suit you and your business. Our knowledgeable staff are ready to help, so please let our team become your business partner and help support you and your business to even greater heights of success.
Here are some added reasons why you should partner with us:
- Invoice advances as high as 100%
- Factoring rates as low as 1%
- Quick, easy, and free application
- Same day funding options available
- Invoice factoring for many types of industries
- Lender to lender financing available
Let’s get started! Fill out our free 90-second online application today!