4 Benefits Of Accounts Receivable Financing
If you’re looking for a way to increase your working capital, chances are you’ve come across accounts receivable financing. Accounts receivable financing, also called factoring, is the selling of your accounts receivables to a third party. They give you cash, and collect the money owed by your customers. There are many benefits to consider when researching this type of financing.
First, consider the improvement in your day if you had reliable, steady income. No more wondering if you’ll get paid in time to pay your vendors. No more panic over making payroll. Just the knowledge that your payments will come in as agreed and give you the working capital you need each month. The stress relief alone makes it all worthwhile.
Now take a moment to mull over the fact that you would no longer have to chase money. You would have outsourced your accounts receivable department. And not to just anyone. You’d have sent it to an experienced, capable company that would treat your customers with the respect they’re due, while ensuring that payment is received in a timely manner. They’d hunt down the money that’s owed for the products and services you work so hard to provide, leaving you free to keep producing and selling.
And while you were working to provide those goods and services, you wouldn’t be incurring the added cost of interest fees on a small business loan. You would have managed to increase your working capital on a monthly cycle without adding any debt to your plate. You wouldn’t have to pay anyone; you’d just be getting paid. Rather than taking a loan, you’d have sold the asset that is your receivables to the factoring company at a discount, so there would be no money out of your pocket at all.
Finally, understand that you would now have a highly-skilled accounts receivable department, a regular influx of cash, all at no out-of-pocket cost to you, and a partner on future credit sales. Your accounts receivable financing company would review new customers to determine credit-worthiness for you, provide you with monthly statements so you know which old customers aren’t paying regularly, and if you qualify, even provide you with free credit insurance.
Accounts receivable financing is a boon to small business for many reasons. If your business is one that sells products or services on 30, 60, or 90 day terms, look a little deeper into factoring and what it can do for you and your business.