There aren’t many ways for a small business to grow substantially without going into debt. However, Accounts Receivable financing does provide one very good approach to financing which is available to small businesses of all types. It’s a fast and simple way of raising funds, and can be done without incurring any long-term debt.
How Accounts Receivable financing works
In Accounts Receivable financing, a factoring company purchases the invoices of a selling company at a discounted rate, somewhere between 70% and 90% of the face value of the invoices. That money is then paid to the invoice seller, and the factoring company then assumes responsibility for collecting the money from customers.
All the original payments remain the same, and the factoring company will eventually repay the selling company the difference between the actual face amount of the invoices, and the amount provided to the seller originally, minus the fee charged by the factoring company.
Advantages of Accounts Receivable financing
In addition to the fact that the invoice selling company does not incur any debt, it does receive an immediate infusion of cash, which can be used for any business purpose. Unlike borrowing money from a traditional bank, it’s not necessary to have outstanding credit to be approved. It’s much more important to a factoring company that customers pay promptly, since that’s where the funds are coming from.
Probably the most important feature of Accounts Receivable financing is that cash can be put in the hands of the selling company extremely fast, perhaps in as little as a day or two. By contrast, taking a traditional loan from a bank would normally take two months to arrange, if you were even approved for the loan, and it would also leave a company in debt for several years.
Accounts receivable financing with BizCap Commercial Finance
At BizCap Commercial Finance, we provide accounts receivable financing to our customers who are interested and who qualify. Contact us today to find out whether or not your company is a good candidate for accounts receivable financing, so we can provide the funding you need.