The Benefits of Accounts Receivable Financing
Whether you’re just starting out, going through a rough period or are trying to expand your business, you will likely need some sort of financing at some point. For small businesses or those with low credit, it can be difficult to get a traditional loan. One other option that you have is accounts receivable financing. This is when you sell your outstanding invoices to another company for a portion of their value. There are several benefits to this type of financing.
1. You Can Use It for Whatever Your Business Needs
With some types of financing, you may be limited to using the funds in a particular area. With accounts receivable financing, this is not the case. You can use the money that you get for anything you need to, as long as it is a business expense. Whether you need to buy equipment, pay employees or purchase inventory, the choice is yours.
2. You Can Get Funds Quickly
A traditional loan can be difficult to qualify for and, even if you do qualify, it can take a while to get the money you need. The application and approval process can take weeks or even months to complete. When you get funding through your accounts receivable, it can go much more quickly. In some cases, you might only be waiting for a few days.
3. Your Credit is Not an Obstacle
A history of bad credit, or a credit history that is too short, can keep you from qualifying for some types of financing. However, because you are selling your accounts receivable and not applying for a loan, your credit is not as important. The company buying your invoices cares more about their value and the likelihood that your customers will be able to make their payments.
4. You Don’t Need to Collect Payments
Another advantage of this type of financing is that it removes some of your responsibility. After you have sold your invoices, the company that purchased them is responsible for collecting payments. This can free up some of your time and allow you to focus on other areas to help your business grow.
If you don’t think that your business can qualify for a traditional loan or you would just prefer to get funding in a different way, accounts receivable financing can be a great alternative. Make sure that you examine your options and understand all of the details of the agreement to ensure you are making the best choice for your company.