Sometimes, as a small business owner, you may have gone through the experience of a cash flow shortage. It can be difficult to get your hands on working capital to help your business grow or even pay some of your bills and invoices. Accounts receivable financing can be the answer for your business. This method is gaining in popularity due to the fact that loans or lines of credit might not be available or is insufficient. Here are some advantages of using accounts receivable funding.
1. Fast Cash
You’re in business and sometimes, you’ll need access to fast cash for a number of reasons like buying inventory or emergency renovations. The money you make comes from your customers, but what if customers are slow to pay? Unfortunately, this happens all the time, but what do you do during a critical point where you really need the money, and fast? Accounts receivable financing can give you the money within one to two days. It can also take a little over a week, but this is still a good enough option.
2. Factoring Is Not A Loan
Because factoring receivables is not a loan, you do not incur a debt. Your balance sheet looks good and it will be easier to get other types of financing. Factoring is a source of financing that grows with your sales. As business increases and you make more sales, you also have access to more money.
3. Huge Time-Saver
Accounts receivable funding will be a big time-saver and relieve some stress at the same time. This is because the process involves getting money from your customers (not by you) and so you don’t have to worry about this annoyance. The factoring company will go after your customers who haven’t paid you yet. Time can now be spent focusing on more productive and lucrative endeavours.
4. Collateral Not Required
The good thing about accounts receivable is that you don’t have to put up some kind of security either from your personal or business assets. If you were to get a loan from just about any other source, there will always be some drawback or some form of security you need to put up. Visit FundThrough and learn more information from the available resources.
5. Ability To Free Up Working Capital
Most of your capital will no doubt be tied up in the inventory. Accounts receivable financing will be able to quickly free up working capital. This allows you to grow the business and invest in more inventory. You could also use this freed up capital for marketing purposes or various other reasons instead of sitting bone idle in your balance sheet due to unpaid invoices.
Do make sure to look at every angle to see if this is the right course of action for your business. A little bit of education on the subject and taking into account your own current situation will help you decide if this is for you.