Is Accounts Receivable Factoring Right For Your Business?

Small to medium size businesses find themselves struggling to finance the growth of sales on net 30 day credit terms. Too much growth to charge accounts will put a cash flow shortage and may cause problems in meeting payables to vendors, payroll and other fixed expenses.

The first thing that naturally comes to a business owner is to go to the local bank for help. Due to the highly regulated bank industry on business loans, if you are lucky enough to meet all the requirements, you may go out of business or lose out on business opportunities by the time your loan gets approved. Then you find out later that the amount of the loan seemed substantial at the time but your business growth exhausts the funds and now your back to square one, only this time the bank will not extend you more credit.

In summary, you are now in the finance business for your customers, paying interest on money tied up in receivables, and no more funds available to sustain future business growth.

So where do businesses that have this problem get their financing?

Factoring companies specialize in financing accounts receivable. Accounts receivable factoring is the selling of outstanding invoices or receivables at a discount in exchange for immediate cash to your business. Imagine if you could convert your receivables to cash flow in 3 to 5 working days, and then collect all future invoices within 24hrs. This is a financing tool that many business owners are taking advantage of everyday.


What are the benefits of accounts receivable factoring?

- Funding of accounts receivable usually can happen in 3 to 5 working days.
- No financial statements are needed.
- No up-front fees to set up an account.
- Converts dead money in receivables to instant cash flow.
- Credit limits are determined based on your customers ability to pay, not your business credit.
- Eliminates the need to borrow money or give up your ownership to private investors.
- Provides professional credit analysis of your accounts and new customers that are going to be sold on credit terms.
- Loans create debt on your balance sheet whereas factoring does not.
- Provides the ability to pay vendors with net 10 day cash discounts which will offset some of the cost.