Accounts receivable financing is a trend in alternative financing that offers many benefits. Small business owners who are considering this type of funding should be aware of the pros and cons before signing any contract with a lender. Take a look at AR financing to know if it’s right for your company.

Accounts receivable financing isn’t a loan. It is a factoring agreement in which your business sells an asset, the invoice, to a lender.

Key benefits of this business financing include:

• No loss of equity; you retain ownership of the business. 

• Quick cash influx into your business instead of waiting weeks for a loan decision. 

• Does not rely on your business or personal credit score.  

Overcoming disadvantages

Accounts receivable financing has its critics. It does have higher costs than a traditional loan. It’s important to understand the terms and conditions to make sure that you’re getting the best deal possible for your business needs.

The length of the contract can be long or short. A longer contract may not be the best thing for your business, so it’s important to negotiate with your lender to get what’s best for your needs. If you just need short-term financing, you don’t want to be locked into a 3-year contract.

Although the lender does not take ownership of your business, it may tell you that you cannot do business with a certain client due to their poor credit history. You may lose some control of your accounts receivable department. However, you can use this to your advantage by working with clients who make timely payments.

Get the facts about financing before you make up your mind

Get more information about accounts receivable financing when you call BizCap Commercial Finance. Take the next step with your business by having the working capital that gets you there.