Today accounts receivable financing is growing in popularity among small business owners. With all the information out there about it, you may wonder if it is something that will benefit your business, too.
With accounts receivable financing, you sell your outstanding invoices at a lower price to a finance company. Your business receives cash, and the finance company takes on the receivable risk. With this type of financing, your business can meet immediate financial needs and boost your business’s credit rating and financial profile.
However, those aren’t the only benefits you will see. Keep reading to learn more benefits offered by accounts receivable financing.
Unexpected expenses and late payments may set your business back suddenly. In some cases, it can be challenging to recover from these situations. With accounts receivable financing, you can turn your credit sales or invoices into cash immediately, without having to ask your clients for a payment continually.
Once you receive the funds, you can use them to purchase inventory, marketing expenses, or hire new employees.
Maintain Equity Ownership
While venture capital may provide you with significant funds to help boost your business, they come at a high cost. If you take on venture backers, they are going to want equity in the business. While it may sound like a good deal right now, it is a situation that may hinder the growth of your business down the road.
If you have another way to access cash, there’s no need to look to investors for help. With accounts receivable financing, you never give up equity in your business. This means you maintain 100% ownership.
Ideal for Small Businesses
Acquiring a loan from a traditional lender requires you to have collateral, a good credit rating, and need over $100K in capital. Also, banks may take weeks or months to verify if you actually have a creditworthy business.
This isn’t the case with accounts receivable funding. This is unsecured financing that does not require you to offer collateral from your business or personal assets. In most cases, approval will only take a few days, sometimes just hours. You can also request the amount you need, rather than having to meet a set minimum.
As you can see, opting for accounts receivable financing provides many potential benefits for your business. Keep this in mind to determine if this is something you want to use for your business growth.