How To Use Accounts Receivable Financing to Your Advantage

Running a business requires a good amount of forward thinking. When you have your eye on the horizon, it makes it a lot easier to tackle problems that appear along the way. This is especially true when it comes to your financial situation. If you’re unable to access working capital at a time when you need it most, this can cause major disruptions to your business. When the issue is caused by your customers, one solution available to you is accounts receivable financing. Sometimes called factoring or AR financing, this service may be a perfect fit for your needs.

The Basic Idea

A service like AR financing is aimed at invoices that have not been fulfilled by your clients. The longer it takes for your customers to make payments for services you’ve completed, the more likely it is your cash flow will be interrupted. A lender that offers factoring service will purchase qualifying invoices from you and give you an advance on a percentage of the total value. After the debt is collected by the lender, you pay a fee and receive the difference on the amount. This straightforward alternative financing solution has a number of key benefits.

How You Benefit From AR Financing

There are many impressive advantages that come along with factoring your invoices. For one, a service like accounts receivable financing is an advance. Unlike financing options like loans, which can sink you further into debt, factoring is simply giving you faster access to the money you have been waiting to receive. Additionally, AR financing is a flexible service. If at any point you find yourself in possession of qualifying invoices, then you can turn to a lender and see immediate cash at a time you need it.

Weighing Out the Pros and Cons

While there are a number of benefits to using AR financing services, you should also consider some of the potential drawbacks. For one, only certain invoices will qualify. Before you assume this is a practical solution, review the invoices with a lender and learn about your options. Be sure to also check on fees related to the service. In some cases, the price of the service can be far more substantial than some business owners realize. Know what you’re in for in advance and it will make your decision much easier.

A service like accounts receivable financing can provide you with some significant benefits at a time when your working capital is disrupted. Look into the service to determine if factoring is a good fit for you.