How accounts receivable financing can level up your business
December 21, 2021at4:00 PM
For many small businesses, cash flow issues are a fact of life. Many businesses have to wait weeks, even months for debtors to pay their outstanding accounts receivables. Naturally, this leads to cash flow issues since the business must absorb operating costs and overheads until the outstanding invoices have been settled.
In such situations, accounts receivable financing can be a great solution. Many business lending facilities allow you to secure cash against receivables within just a few days. This way, you can meet your business’s short-term financial obligations and maintain a healthy cash flow.
What is accounts receivable financing?
In simplest terms, it is a means of short-term business funding that a company can draw against its accounts receivables. If you’re struggling to pay your business bills due to delayed invoice payments, you can take out an accounts receivable loan or factoring using those pending payments as collateral. The lender will lend a substantial portion of the invoice(s) - generally 75-90%. One can get a loan on all of a business's receivables, often called A/R, or just a select few.
Let’s say your company has accounts receivable worth $10,000. If you don't expect those receivables to be paid for several weeks to months but you have more immediate cash flow needs. We would then apply for account receivable financing and get an advance of $7,500 to $9,000 against the $10,000 of invoices.
One of the main challenges you might face when applying for accounts receivable financing is finding a good lender. At NTIB Finance & Consulting, we’ve got you covered. We work with businesses in almost all industries to get you the capital injection you need from your unpaid invoices. Many A/R lenders only work in specific industries and we will be able to quickly get your application to the best lender to fit your needs.
What are the main benefits of accounts receivable financing?
1. Quick access to needed funds
Late payments and unexpected expenses can cause considerable cash flow issues in your business. Sometimes you don’t have the luxury of waiting 30-, 60- or 90-day pay cycles on your invoices.
Accounts receivable financing allows you to access the funding you need to cover your working capital needs within a short time frame, usually within 48 to 72 hours, maybe even shorter.
2. Viable alternative to bank loans
Banks and many other types of lending institutions require standard collaterals from businesses looking to take out a loan. Unfortunately, many companies, especially startups and small businesses, are not in a position to present such collateral. This makes bank loans inaccessible to them.
With accounts receivable financing, they can get the funding they need without having to put up standard collateral. More importantly these type of loans happen very quickly (often in just a couple of days) and are much simpler and easier to obtain.
3. Take advantage of growth opportunities
Sometimes, growth opportunities arise at a time when you don’t have the necessary funds to capitalize on them. As a business owner, you probably already know that such opportunities are often hard to come by and may not present themselves ever again.
Taking out an accounts receivable loan can provide the much-needed boost in cash flow that allows you to level up your business as soon as the opportunity arises.
4. Less stress
The application process for accounts receivable financing is generally simpler compared to other types of business funding options. Once approved, the ongoing funding process is straightforward as well. You can even grow your credit line as fast as your business expands.
You also enjoy peace of mind knowing that you have fast and simple access to working capital when needed. This makes it easier to meet short-term challenges and focus on business operations that can lead to sustained success.
Secure the business financing you need today
NTIB Finance & Consulting is your trusted business financing partner. We provide tailored funding programs to suit your business’s needs at the most cost-effective rates.
Let our team help you get the funding you need for your business today. Call us now at 914.419.3059 or send us a message through our contact form to get started.