The Unseen Benefits of Accounts Receivable Financing
For small business owners, periodic cash shortages are all but inevitable. Accounts receivable financing provides an option for increased cash flow to pay bills and stimulate growth. Here are some of its advantages.
Generate Quick Cash Flow
It’s difficult to purchase inventory, upgrade equipment or pay the salaries of your employees when you have slow-paying clients. In accounts receivable financing, a factoring company buys your unpaid invoices for up to 90 percent of their amount in cash. You typically receive the money you need within a day or two. When the customer finally pays, you receive the balance minus the factoring company’s fee.
Keep Out of Debt
Because accounts receivable financing is not a loan, your business obtains needed cash while remaining debt-free. You don’t put your business, inventory, house or car at risk because no collateral is involved.
Outside investors often insist on a percentage of ownership in the business in return for their financial participation. Every time you need more funding, you lose another portion of equity. Accounts receivable financing allows you to retain equity in your company while at the same time acquiring the capital you need.
Protect Your Credit Rating
The seasonal ebb and flow of cash in small businesses often negatively impacts their credit ratings. Because accounts receivable financing allows you to maintain a steady cash flow and handle your bills promptly, your credit rating remains stable or even improves.
Remain in Control
Accounts receivable financing does not involve a lien on all your invoices. Instead, you decide which invoices to pass on to the factoring company and which to retain. As a small business owner, you maintain control over your finances.
All small businesses in various stages of growth need access to quick finances to handle obligations and take advantage of opportunities for growth. Accounts receivable financing may provide the answer for you. For advice on this and other aspects of small business finances, get in touch with Flipside Capital.