A Complete Guide to Accounts Receivable Financing

A Complete Guide to Accounts Receivable Financing

Businesses that partner with commercial clients usually have to wait thirty to sixty days before receiving their payment. This service provides ‘net terms’ and is common in government and commercial sales. Typically, clients request terms as a condition of awarding an agreement.

Unfortunately, offering terms causes a dilemma for businesses lacking the cash reserves needed before receiving payment. These businesses require earlier payments for them to cater for their expenses. Taking on new clients places them at risk of facing financial issues.

Account receivable financing offers a solution to this issue. It assists businesses to enhance their cash flow by enabling the funding of their slow-paying invoices, allowing them to take additional clients and develop.

The Process Of Financing Accounts Receivables 

Typically, setting up a business to receive the first funding can take several days. However, a business continuously receives funding after submitting the request to the factor within a business day. Below, is the process followed when financing account receivables.

Conducting Due Diligence And Setting Up The Account

When a company accepts a finance proposal, the factoring firm usually checks some basic things about the company. This process determines whether the company is financeable.

Choosing Clients To Be Financed

After choosing the clients to be financed, they are sent a Notice of Assignment, and they usually receive it only once.

Invoice Submission And Funding Preparation

This is the point that a business is set to submit invoices for financing. Often, the invoices may be submitted through a web portal or email.

Financing The Invoices

After verification, the finance firm usually analyzes the advance and deposits and transfers the money to the customer’s bank account. The advance is the portion of the invoice that is financed.

Payments of Invoices And Settlement Of The Account

The clients of a business pay invoices on their usual schedule. Mailed payments are transferred to a bank lockbox, while electronic ones are sent to a specific account.

Ongoing Funding Process

Most firms finance their account receivables as one of their ongoing processes to enhance cash flow.

Are you looking for a company to finance your account receivables? Contact us today at Green Apple Funding for more information.