Why Accounts Receivable Financing Makes Sense for Your Business

Why Accounts Receivable Financing Makes Sense for Your Business

Most businesses eventually run into a situation where they need some quick cash. The need for cash could be because of an opportunity for expansion, a cash flow problem, or a need to meet payroll. In any such situation, accounts receivable financing could be a great solution.

What Is Accounts Receivable Financing?

There are two types of financing that fall under this definition. The first is a normal loan where the accounts receivables for your business are used as collateral for the loan. The second is more specifically called accounts receivable factoring. In this case, a factoring company will purchase some of the accounts receivables of your business outright. Then you can use that money for any funding needs.

Advantages of Accounts Receivable Factoring or Financing

1. Get the Money You Need Quickly

With accounts receivable factoring, you can often get cash for your business in a week or less. This allows you to meet whatever obligation or opportunity you need cash for in a timely matter. A traditional loan using accounts receivables as collateral is also usually able to be funded relatively quickly.

2. Ignore the Creditworthiness of Your Business

Accounts receivable factoring or financing does not depend on how good the credit of your business or your credit is. Instead, the bank or factoring company will analyze the creditworthiness of your customers whose accounts are involved. The only thing that counts is the value of the receivables.

3. Keep Your Business From Going Into More Debt

If you use accounts receivable factoring to get money for your business, you are not going further into debt. Instead, you are selling the accounts receivables outright and receiving money for them. It is a sale and not a loan. You will not have to worry about increasing your debt-to-income ratio or paying high-interest rates. Even if you do take out a loan and use accounts receivables as collateral, the loan will be short-term. Also, it will be repaid quickly as the accounts receivables are paid.

The next time your business requires a cash infusion, consider selling your accounts receivables to a factoring company or using them as collateral for a loan. This is a lot easier process than applying for a traditional business loan. Don’t let a business opportunity pass you by when you could use this easy method of funding to get the cash you need.

Seek Expert Assistance

Contact Green Apple Funding for financing solutions to help your business grow.