It’s not unusual for successful businesses to experience cash flow problems. Problems often occur because you have to pay corporate expenses quickly; however, your commercial clients have 30 to 60 days to pay their invoices. Having a lot of money tied to slow-paying receivables forces you to use cash reserves – leaving you in a challenging financial position.
One way to solve this problem and improve your cash flow is to get an accounts receivable loan, commonly referred to as accounts receivable factoring. By advancing funds against your slow-paying accounts receivable, this solution gives you the funds you need to operate your business while minimizing collection worries. This link explains how accounts receivable factoring works.
When used correctly, a receivables financing solution can improve your cash flow and help you grow your company. Receivables financing offers the following benefits:
Benefit #1: Get paid sooner
The most important benefit of this solution is that you can monetize your accounts receivable. Instead of waiting up to 60 days to get paid, you receive immediate funding from the factoring company – funding that you can use to pay corporate expenses or to grow your business.
Benefit #2: Improve the creditworthiness of your client portfolio
Most factoring companies will work with you to monitor the creditworthiness of your commercial clients and receivables. You can leverage their credit expertise so that you provide credit only to clients who deserve it and are very likely to pay on time. This leverage allows you to improve the strength of your client base while improving your cash flow.
Benefit #3: Take on new clients
An important advantage of using receivables financing is that you can grow your business. If you are concerned about taking on new clients because your company is low on cash, you can use the line to finance invoices from new clients. Simply finance those invoices as the work is completed, which improves your cash position. If used appropriately, you can use the line as a tool to land new clients and book increasing revenues.
Benefit #4: Get funded quickly
Most receivables financing programs have quick approval processes. You can usually get funded within a week or two. This quick turnaround makes receivables financing an attractive option for companies that are going through financial problems and need funding quickly.
Benefit #5: Financing grows with your business
Accounts receivable financing is designed to be dynamic. The amount of financing can grow automatically to match an increase in receivables, as long as the invoices qualify. If additional due diligence is required, it can often be completed in a couple of days. Receivables financing can be an ideal alternative for companies that are growing very quickly.
Is receivables financing the right solution for your company?
Receivables factoring can help your company if your main problem is that you have cash flow shortages because your clients are taking up to 60 days to pay invoices. The product is designed to solve this specific problem. To help determine if we are the right solution for you, read “Is Factoring is Right for my Company?”