Growing Funds Along With Your Business

It isn't an exaggeration to say that funding is the life energy of a business. If you own a small or medium sized business, then you must deal with cash flow issues day-in and day-out. It can be frustrating if you struggle to maintain your company's cash flow and are unable to cover ongoing operating expenses. At the same time, your company's invoice aging report shows that there are a significant number of outstanding invoices. You can't wait for 15, 30 or 45 days or more for receiving payments from customers. You need money to manage payroll, to fund infrastructure costs and to afford other expenses. Trying for a loan isn't always feasible since chances are good that banks will not approve your application due to stricter lending regulations. Even in this dismal scenario, you can get the required cash quickly through a flexible financing option known as accounts receivable financing.

With available funds, your business will always be ready to take on any kind of financial challenges. You can meet your regular business obligations or mobilize the business towards expansion.

How Accounts Receivable Financing Works?

A/R financing works following a simple methodology. When you already have a good number of invoices, you can sell them to a factoring company that will pay you an advance amount (between 40% and 90%) less a discount fee (ranging from 2.5% to 7.0%). The percentage of the advance amount will depend on the invoices' amount and their aging. Once you receive the cash, you need not pay it back as you do in the case of a loan. The factoring company will collect the invoice amount from your customer as per the invoice terms in 15, 30, 45 days etc.

In the entire process of factoring you will be using your outstanding invoices as collateral. After having financing on your receivables, the cash flow to your business will gradually grow along with the invoiced sales. Some of the biggest advantages of factoring are:

• It has quick turnaround time. No processing delay.
• It is based on the creditworthiness of your customers, not your business' credit history.
• You won't be incurring any debt like a loan since you are selling your assets (invoices).

Your invoices can get you the required cash conveniently and affordably, and in as short a time as four days. You can have complete control over your cash flow going forward.

How Can Your Business Qualify A/R Financing?

There are no strict eligibility criteria to get accounts receivable financing. Regardless of the size of your business, credit history can qualify your business as long as you have outstanding invoices. Businesses ranging from manufacturing, telecommunications, consulting services, logistics, subcontracting and even supply businesses can avail factoring services. Therefore, you need not depend on a bank as you can get need-based funding through invoiced sales.

So, if your growing business is running into problems due to lack of working capital or because of your customers' late payments, you can easily overcome it by increasing your business' line of credit or long-term financing to pay your ongoing expenses or deploy the company's growth strategy.