Accessing Funds From Invoices Can Be Made Very Easy
Most businesses periodically have difficulties with cash flow, especially those that allow customers long payment terms. However, one strategy to ensure continuous strong cash flow is accounts receivable financing.
Here is how this method of funding can easily help you access the cash you need from your unpaid invoices.
The Basics of Accounts Receivable Financing
Once the factoring company you work with verifies and approves your invoices, you receive up to 90 percent of their value as an advance. You can use this for working capital, employee salaries, purchasing inventory or equipment, company expansion, or any other business-related purpose. When your clients pay their bills, you receive the balance of the invoice amounts minus the factoring fee.
Advantages of Accounts Receivable Financing
When your clients insist on long payment terms but you need the funds right away, accounts receivable financing closes the gap. Even if you qualify, obtaining approval for traditional bank loans is a long and tedious undertaking. However, the approval process for accounts receivable financing is quick and simple, and once your invoices are approved, you can have the funds available within a few days. Invoice factoring depends on the creditworthiness of your customers, not your company, so you can use this form of funding even if you have not yet built up a strong business credit score.
Selecting a Factoring Company
Before you commit to accounts receivables financing with a factoring company, conduct some research to be sure that you select the right business for your company’s needs. Peruse customer reviews, and go over the factor’s terms and conditions. Getting a reasonable rate is an important consideration, but there are other things to keep in mind as well. Understand all the details of the program you are interested in before you make a commitment.
For more advice on strengthening cash flow through accounts receivable financing, get in touch with Fintrus.