Your small business must have working capital in order to stay afloat. Accounts receivable factoring is a great way to gain the working capital you need in order to maintain a steady cash flow and free up this money to go on to purchase raw goods and other things. Many businesses use accounts receivable factoring as a way to secure immediate cash now and to avoid dealing with the hassle of collecting money from their customers.
Most businesses will provide credit to their customers in the form of invoicing and net terms. For a customer it is a great option as you have the ability to get the product you need without worrying about paying for a few weeks while you are trying to secure the money you need to pay the invoice. You probably do this with some of your vendors and its great for you because you can wait to secure money and then pay before your vendors report it to your business credit rating. Although it's great for the customer, it's not always great for the small business that is extending the credit.
Being left with accounts receivable can be dangerous as many of the customers may drag their feet and take awhile to pay the invoices. This is why one of your best options is to avoid dealing with the collection process altogether and leave that to another company to handle for you.
When you decide to use accounts receivable factoring, you will work with a factoring firm that will give you 80% or more of the total invoice amount up front. Then you will receive the other 10% or more when the customer pays their invoice. You have a fee to pay to the factoring firm that you need to deduct. Which is why you make about 90% of the total invoice amount. When you use accounts receivable factoring you have a chance to use the money to pay for your invoices or to purchase raw goods and advertise to your customers. It's a great way to free up your working capital so you can continue to operate your business.
A lot of small businesses turn to accounts receivable factoring as its one of the best ways to get the money you need to pay for your small business needs. You can finally afford to take on those larger orders which could cost your company a lot of money to produce. Having 80% of the payment up front will help you avoid dealing with cash flow problems.
Here are some of the other reasons why you need to consider using accounts receivable factoring:
To work with an accounts receivable factoring firm you need to offer them invoices that are less than 90 days old. When they are older than 90 days, it is harder for the factoring firm to collect on the money.
Most companies that choose to use factoring firms may have tried in the past to acquire small business loans and have not been able to acquiring the financing they are looking for. With accounts receivable factoring you do not need to undergo all of the problems of sending in your business credit rating and other things that can force lenders to deny you for a loan. It's much easier to obtain accounts receivable factoring and it is one of the fastest ways to strengthen your cash flow in a hurry if you have been having problems.
Corporate Credit Concepts specializes in accounts receivable factoring. For more information about accounts receivable factoring and how it might benefit your business, please CLICK HERE for a free phone consultation.