Tag Archives: Accounts Receivable Financing

Get your Business Moving without Running into Debt

We all know that small businesses are key to the growth of the US economy.  Success and failure of small businesses create ripple effects which eventually make positive or negative impacts on the broader segments of the marketplace. In recent times, micro businesses are facing plenty of roadblocks on their path of growth due to unfavorable federal policies resulting in lending restrictions. Banks are no longer willing to approve loans to these businesses as they are over-sensitive to credit history and profit margins. Even your business’ convertible assets like invoices are not acceptable to banks. These disapproving banks can’t really impede on your business’ sustainability, as the same invoices can work as collaterals to get you hard cash through spot factoring.  

If you consider the current lending market, the conventional ways of getting loans seem to be over. Banks are not approving loan applications if you’ve been doing business for less than two years, or if your business has bad credit or no credit history. Companies that have experienced bankruptcy have lesser chances to qualify for conventional funding. However, through A/R financing or factoring, you can regulate your business’ cash flow if it is on the verge of drying up. Even start-up businesses with little or no credit history have been denied loans by banks, yet qualified for this service.

A/R factoring works like this — the factoring company buys outstanding invoices after deducting a discount fee (2.5% to 7%) and then advances up to 90% of the balance receivable from the customer. Getting funds through factoring accelerates the revenues that are due from slow paying receivables and gets your business quick working capital. Moreover, this fund will not create debt for your business. Soon after receiving an advance through factoring, you can put the cash immediately to work in the form of working capital. The balance amount will be remitted once the customer makes payment on the invoice.

Your business will get the following benefits from spot factoring:

•     Pay operating expenses.

•     Can grow without incurring debt.

•     Buy new state-of-the art machinery.

•     Take advantage of supplier discounts.

•     Can launch new marketing campaigns.

Now, you have found a method of regulating working capital and ensure constant cash flow that makes your business function seamlessly.