Benefits Of Accounts Receivable Financing

Written by Economic Development Jobs on April 8, 2019. Posted in Small business factoring invoice, What are factoring services, What is business receivable factoring


It is not without a doubt that accounts receivable funding has been gaining in popularity over the past decade for obvious reasons. The truth is that this form of business credit funding has great benefits that most businesses find it hard to resist. For small and medium-sized enterprises, business invoice factoring improves the overall financial profile of your business as well as the credit rating. This is the reason why most companies would rather use accounts receivable funding to meet their short term financing needs especially when there is need for immediate funding. Considering that the conventional financial institutions such as bank take time to process loans locking out most businesses from accessing emergency funding, it can be expected that accounts receivable funding will continue growing in popularity across different industries including those that have not embraced this financing concept yet. Below are some of the benefits of accounts receivable loans.

Immediate Cash Flow: For small startups, one of the greatest challenges is the cash flow challenge. This is because, such a business would be operating on a lean budget and most of the startup capital would have already gone into inventory. In order to stay afloat, such businesses need emergency funding when the need arises. This is the reason why accounts receivable financing companies have found a way to assist such businesses. You can easily convert your credit sales into cash flow for your business. The outstanding invoices from your clients are monetized by the invoice factoring companies meaning that you can access immediate funding whenever you need it. The best part is that you don’t have to wait for weeks or months for your client to pay the invoice for you to access the cash.


Enhanced Credit Rating: A bad credit rating can be detrimental to your business as most lenders rely on the credit score to assess how well you are able to meet your financial obligations. With accounts receivable funding, it means that your business will always be in a position to meet its financial obligations and that you can make payments on a timely manner if not ahead of time. Since you already have adequate cash flow in the business, there is less likelihood that you will need to seek additional funding such as venture capital. Venture capital will require you to relinquish your equity in the business. On the other hand, business invoice factoring does not require you to relinquish equity in the business meaning that you continue to retain ownership of the business.

More Focus in the Business: During the early stages of any business, the challenge is mainly logistical as well as financial. Lack of working capital can be quite stressful to a business owner since most time, your time will be spent looking for this additional capital. With accounts receivable funding, you can free up your resources as you will immediately have access to working capital. This will give you a peace of mind and more time to concentrate on other business operations such as marketing your products or services. In addition, the factoring company is the one that follows up on the payments from your clients. This should work to your advantage as you ill spend less time chasing after unsympathetic clients to collect the amount due.

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