Accounts receivable financing is one of the oldest forms of funding for business in existence. It’s a process that involves selling some or all of your outstanding invoices to a factoring company at a price somewhat below the face value of those invoices. At that point, the factor will take on responsibility for collecting the amounts for those invoices, while you are paid something like 80% of the face value of the invoices. Once the factor collects on those invoices, your business would receive the other 20% of the invoice amounts, with the factoring fee subtracted by the factor. There are a number of powerful advantages to engaging in accounts receivable financing, some of which are described below.
There’s no need for your business to provide collateral when setting up Accounts Receivable factoring, because the invoices themselves serve as collateral in this kind of arrangement. This means there is no risk to you of losing any of your valuable assets, and you’ll never have to worry about putting up personal property to obtain funding.
As opposed to applying for a traditional bank loan which might take months to process, you could have cash in your hands in as little as a day or two, once you have Accounts Receivable financing set up with a factor. This is far more useful to your company than it would be to wait for weeks on end, hoping for approval from a traditional lender.
No Credit History Necessary
Applying for a traditional bank loan will require that you have very good credit, or you are likely to be disapproved. With factoring, your business credit history doesn’t really even come into play. A factoring company will be much more interested in how promptly your customers pay their invoices, rather than any business credit history of yours.
No Receivables Staff
If you decide to set up Accounts Receivable financing on an ongoing basis, you won’t have to maintain a collectibles staff to ensure that you get paid for your invoices. Since the factoring company is responsible for collecting on those invoices, you can reassign employees to more business-specific tasks, and either reduce or eliminate your receivables department.
Considering Accounts Receivable Financing?
If so, we’d like to hear from you so we can explore some options available to you with accounts receivable financing. Contact us at Nations Capital Financing, so you can enjoy the benefits available through this unique financing opportunity.