Sometimes, as the expression goes, “there’s too much month left at the end of the money.” If that is the case with your business, a useful solution can be accounts receivable financing.
What is Accounts Receivable Financing
Accounts receivable financing is the process by which companies, large and small, secure loans against their outstanding invoices. A financing company provides a lump sum of cash based on your receivables and those receivables serve as collateral for the cash that is advanced.
How Does Accounts Receivable Financing Work
First, your business applies for funding with an accounts receivable financing company. The financing lender will require invoices and other supporting documentation.
Second, the lender funds a portion of the invoice total, generally about 80 percent of the invoice value, depending on the industry and the invoiced customers’ credit history.
Third, your business uses the funds as you desire.
Fourth, the lender charges a weekly fee against the loan until the end customer pays his/her invoices.
Fifth, the invoiced customers pay their invoices directly to the financing company. The lender pays the balance to your business less their fees.
Why Do Businesses Use Accounts Receivable Financing
Accounts receivable financing is a financing option for when businesses have short-term cash flow challenges, when they need extra cash for an unexpected business opportunity, to deal with seasonal business swings, when they need to support rapid growth, when they need help to pay for current business expenses, and when they need funds to make business improvements.
The Advantages to Accounts Receivable Financing
The advantages include generally quick approval and rapid funding, an easy application process, there are no long-term contracts required, and there is flexibility to choose the financing amount and financing timing. This approach can smooth cashflow and ease a company’s financial challenges, plus collateral is not needed (because the invoices themselves are assets,)
Seek Expert Financing Assistance
Contact My Commercial Capital, based in Bel Air, MD, for expert financing assistance. We have a wide variety of financing solutions to meet your needs, structured to provide maximum benefits to borrowers.