Benefits of Accounts Receivable Financing
If you’re wondering whether accounts receivable financing is right for your business, it can be helpful to know the advantages of this type of financing. That way you can gauge the potential benefits for your company and make plans for the future. Here are several reasons with AR financing may be the ideal kind of alternative funding for you.
Low Credit Requirements
One of the most attractive aspects of accounts receivable financing is that your company doesn’t need excellent credit to qualify. Of course, if you do have an amazing credit score, it can work in your favor by ensuring low financing costs. However, even businesses with poor or fair credit can get approved as long as they have unpaid invoices from trustworthy customers.
The way AR financing works is perfectly suited for companies with less-than-ideal business credit. The factoring company doesn’t look at your business’s credit score when determining whether to advance the capital. Instead, it analyzes the credit history of your clients. If you sell products to a large manufacturer, for example, you can qualify for AR funds by submitting the client’s unpaid invoices. Many corporate clients have an excellent reputation for repayment, so receiving financing is relatively fast and easy with this option.
Versatile Financing for Businesses of Every Size
There are literally no limits to how you can spend the money provided by your accounts receivables. That’s because this type of alternative financing doesn’t give you a loan that you have to repay. AR financing acts as a cash advance of the invoice’s value. You receive funds that already belong to your company, but more quickly than normal.
This provides many options for small businesses and large companies alike. You can leverage unpaid invoices to buy equipment, make down payments, pay your employees, pay taxes or invest in limitless business opportunities. Since even small businesses usually have large clients, these invoices can provide a substantial infusion of working capital exactly when you need it.
Debt-Free Financing
Another big benefit of accounts receivable financing is the way cash advances work. Unlike traditional loans or leases, you don’t have to make payments on anything when it comes to AR funding. The small percentage-based service fee is deducted from the total value of the invoice automatically and the remaining portion is deposited in your bank account. You never have to worry about accruing interest or seeing negative effects on your credit rating. AR financing doesn’t have any impact on your credit whatsoever.
If you haven’t signed up for A/R financing yet, you should take the time to analyze whether it’s time to start. You may be thrilled with the results.
