What Is Accounts Receivable Financing?

Posted at September 10, 2020 » By : » Categories : Business Funding »
accounts receivable financing

Did you know the average large business in America takes 56 days to pay their supplier’s invoices? Are you a supplier waiting for those seemingly endless two months for that invoice to finally clear? If so, then it can be frustrating staying on top of your bills when you’re not sure how long it will take before your accounts receivable is paid. Don’t worry, there is a way you can better control your cash flow so you can cover your expenses on time. If you have steady and consistent sales, and you can show your clients are in good standing, then you can turn your AR into immediate cash through accounts receivable financing.

You won’t have to dust off your business plan or fill out lengthy paperwork to do so. Keep reading to learn how this simple funding method can improve your cash flow so you can plan ahead for your expenses.

What is Accounts Receivable Financing?

You’ve built a successful and valuable business. You have great customers and they love the product or service you provide. However, sometimes there can be a lag between the time you provide the product or service to when you receive payment from your customer or client.

When this happens it can be frustrating as you have bills that need to be paid and employees that have their own bills piling up. Just as with any other asset on your balance sheet, your accounts receivable balance can be leveraged when you need that money.

Your AR balance is any money owed to you by a customer or client for any goods or services that have already been provided. This balance is also known as an open invoice and it is a normal part of the business cycle.

This is money that you can usually count on receiving. But, unfortunately, you can’t always be sure on when you’ll receive it.

Don’t fall behind on your own bills when you know that you have money eventually coming to you. Instead, leverage this future income with a short term loan utilizing accounts receivable financing.

Benefits of AR Financing

There are several benefits to this type of financing. You already know that the goods have been provided. Whether you sell physical products, digital products, or services, you already know the sale has been fulfilled.

Don’t wait around for your clients to pay you before you can pay your own bills. And don’t risk paying your bills late or losing good employees due to you being short on cash. Utilize your current assets to ensure your debts are taken care of.

Here are six benefits of using your AR as collateral through accounts receivable financing:

  • Control and improve your cash flow
  • Pay your bills on time
  • Keep up with your payroll and taxes
  • Easier to obtain than traditional financing
  • No collateral being tied up
  • It is paid off when invoices get paid

Now you can unlock these funds that are being tied up and start utilizing this working capital. Plus you don’t have to wait as long as traditional funding takes. Some lenders can advance you the funds the day after you provide them with your invoices.

So, if you have a good relationship with your clients, and you know that this money will be coming in eventually. Now might be the time to tap into your AR and pay off some of your business expenses or use the funds to grow your company.

Should You Consider Accounts Receivable Financing?

If you can show a consistent volume of new invoices, then financing these invoices can help improve your cash flow. This process of selling your invoices to a lender can make balancing your budget less difficult.

Better manage and control your cash flow by considering financing your invoices. These are sales you’ve already closed, and likely already fulfilled. You know you’ll get paid eventually, but you’ve got bills to pay and employees payroll to consider.

Don’t jeopardize your business waiting on your receivables to finally get paid. Instead, take control of your expenses and turn your invoices into cash now.

Accounts receivable loans can bridge any time lapse between a current need and your future incoming payments. Regardless of whether or not you’re expanding your business and need to grow capacity, or you’re covering a short term gap, AR loans are a great option for you.

One important thing to remember as you tap into your accounts receivable for funding is to maintain a consistent collections process. This will ensure that you do in fact collect the money owed to you and that it is paid to your lender.

Unfortunately, if you’re in business today, you know the need to offer your clients extra time to pay their invoices, or you could be driven out of business by competitors who will. However, you also know that you need that money to pay your employees and other business expenses.

AR financing could be the solution for you and your business.

Accounts Receivable Financing Can Fund Your Business’s Growth

You’re working hard to build a successful and profitable business. You might be ready to expand or you could find yourself short on payroll this month. Whatever the reason, you need quick cash, and accounts receivable financing is a great option.

If your business can show consistent sales and you have a good customer base who pay their invoices, then consider AR financing to help improve your cash flow.

Don’t wait another minute agonizing over paying bills or upgrading outdated equipment. Check out our simple two-minute application, and start financing your business today.