Running a business, particularly a small business, can mean shuffling bills around while waiting for your clients to pay you for projects. This can sometimes put you in the red or make you miss out on opportunities to take on bigger projects or expand your resources. With accounts receivable financing, you can get paid for the invoices that you have outstanding and let someone else take care of the collection process, all for a fraction of what you are owed.
Pay Your Bills
Accounts receivable financing can make it easier to pay your monthly bills, especially if your customers have thirty or even ninety days to pay you for the work you have done. This can help keep your overhead in the black between projects and even help you purchase the supplies you need for the next project.
Since factoring your accounts receivable is not a loan, you will not have to worry about adding another bill to your pile. The payment for this service is taken out of the total amount of the invoices before the cash is given to you and is usually a very small percentage. This means that you will get upwards of ninety percent of your invoice amount to pay the bills you already have.
Upgrade and Expand Your Company
One of the bonuses of using accounts receivable financing is having the ability to upgrade and expand your company as those opportunities become available instead of having to wait until the invoices are paid. This can get you better deals on property and equipment as well as hire the personnel it takes to get the job done.
Another bonus to using factoring to finance your expansion or upgrade is that since it is not a loan, you will not have to pitch your ideas to a panel for approval. You can get the financing from your accounts receivable and spend it at your own discretion. You also won’t have to pay back a business loan for these funds and it will look better on your company’s credit score.
Accounts receivable financing can help you pay your bills as well as upgrade and expand your company. This type of financing involves selling your invoices to a third-party and getting their value, minus a small fee, more quickly than the payment terms you have with your customers. The financing company then collects on those invoices when they are due, and you have the funds to take on new projects, pay bills or buy new equipment sooner.