It is not without reason that Accounts Receivable Financing has gone mainstream in the past few years. The benefits offered by this type of financing are too good to resist.
When Bank Loans are Not An Option
When businesses grow, opportunities for expansion arise. However, to keep a plant growing, you need to water it! The same goes for a Business. To keep their business expanding Companies will find themselves needing additional funding to meet up with payroll, marketing, or other expenses.
In most cases, prominent Corporations are financially strong enough to obtain a Bank Loan as a means of increased credit. For smaller companies, however, qualifying for a Bank Loan could become a nightmare. They will have to meet the strict borrowing requirements such as a review of their company’s financials, assets and liabilities, and credit history.
In that case, less traditional means of financing are necessary. The good news is you can qualify for Account Receivable Financing solution regardless of your credit score. Because they are buying unpaid invoices, most Factoring Companies are more concerned with your clients’ credit strength.
When you need a quick solution
It’s no secret that banks have strict requirements to obtain a conventional loan. Securing a loan or line of credit can take up to two months. While Factoring Companies buy your eligible invoices at a discount and advance you up to 92% of the total amount within hours of verification. Therefore, factoring invoices mean you get as much working capital as you need quickly. When your customer pays the rest of the invoice, the factor will release the balance on the account, minus a small fee for utilizing the service.
When you need more flexibility
Conventional bank loans are pretty cut and dry. You get a certain amount of money loan, and the bank expects you to pay it back over a specific amount of time with a high-interest rate. Getting more cash also means adding more overall debt to your accounts. With Account Receivable Financing, you aren’t piling up any more debt–you’re selling a valuable asset. The amount of money you can finance grows as your receivables grow. As long as you have invoices to Factor, your Company has an unlimited possibility!
Furthermore, you remain in control: you can choose which of your client’s invoices you wish to factor and how often. Forget about the long-term contracts, Account Receivable Financing is a flexible agreement, with flexible terms. For instance, while your annual percentage rate is locked long-term, or for the life of the loan when you go with a Bank Loan, with Account Receivable Financing, rates can be adjusted as you finance more money through Factoring.
Give it a try
In addition to being quicker, more flexible, and available to all types of businesses compared to Bank Loans, Account Receivable Financing is also sparing you the extensive paperwork! Target the Factoring Companies proposing to handle collections of your Accounts Receivable and providing additional back-office services.
Next time you dream of expansion and growth for your business, don’t give up on it. What a Bank Loan couldn’t help you achieve, Factoring could!