Watch Your Business Soar With
Accounts Receivable Financing

Does your established company need fast money to meet its current obligations or a reliable, debt-free source of working capital financing? Are you looking for a way to finance growth?

With accounts receivable financing, you will have all of this — and more — making it the best of all worlds in business financing. You get:

• Fast money (often in your bank account within 48 hours) to meet urgent needs
• Stable working capital financing
• A tool to finance expansion without incurring debt.

What Is Accounts Receivable Financing?

When your business performs works or sells goods to a customer who does not immediately pay for the work or product, a receivable is created. Typically, an invoice is sent to the customer documenting the goods or services rendered, the amount due and the terms of payment, normally 30 days, but sometimes longer.

For a business owner in need of quick money, a stack of open invoices can mean lost opportunity ... or worse.

On the one hand, granting terms allows you to attract customers. Many companies, larger ones in particular, and government agencies expect extended payment terms and will refrain from doing business with companies that do not offer them. If your company is not currently offering terms to its customers, then accounts receivable financing can be the vehicle to more business. Not only will new customers be enticed to do business with you, but with favorable terms, your current ones will likely buy more.

On the other, while you wait for the payment to arrive, the money owed your company is not available to the business to pay for labor, materials, and overhead. This fact alone precludes many businesses from offering terms, while creating serious — sometimes ruinous — financial difficulties for others.

Accounts receivable financing allows you to convert your invoices to immediate cash. By using one or more of the methods described below, extending terms to your current and prospective customers will no longer be a consideration.

Methods of Accounts Receivable Financing

The cash flow industry offers business owners several methods of turning invoices into cash.

Business Factoring ... By far the most versatile and widely used of the techniques, business factoring (also known as "receivables factoring") is the straight sale of a company's (the client's) invoices to a factor — a cash flow business, or finance firm — at a small discount. The factor immediately advances a pre-determined lump sum payment to the client, typically 70% to 90% of the total invoices, holding the remainder in reserve until it receives payment from the client's customers. Once the invoices are paid in full, the factor collects its discount (generally between 1% and 2%) and forwards the balance of the reserve to the client.

Since business factoring is the sale of invoices to a factor, it is never a loan. Therefore, even if your personal and business credit ratings are not good, receivables factoring is an attractive business financing option available to you.

Accounts Financing (Business Line of Credit) ... Unlike business factoring, accounts financing is structured as an asset-based loan, most often a business line of credit. The client's invoices are pledged as collateral for the loan, which, also unlike receivables factoring — a perpetual arrangement — generally has a fixed term of 3-5 years. As a loan, accounts financing will generally require a well-established firm with solid business credit ratings to be eligible.

Floating Lien Financing ... Like accounts financing, a floating lien arrangement is structured as a loan. However, rather than giving the client company a business line of credit with the ability to take daily advances, the floating lien arrangement will typically allow for advances on a more limited basis (monthly, for example).

Off-Balance Sheet Financing ... Generally available only to large, well-established firms with excellent business credit ratings, off-balance sheet financing is similar in form to receivables factoring, since the accounts receivable are sold to a cash flow business. The main distinction from business factoring is how payment of the client receivables is managed. When factoring invoices, the client's customer pays the factor, but with an off-balance sheet facility, the client collects the payment and forwards it to the cash flow business that has purchased the invoice.

Is Accounts Receivable Financing Right For Your Business?

While accounts receivable financing offers tremendous benefits to business owners and executives, it will not work for every type of business. Companies that sell products and services exclusively to consumers or businesses who pay in full with cash or credit cards will not ordinarily be able to use any of the above methods.

Any firm that has creditworthy business or government customers can use accounts receivable financing to build and sustain a thriving company. With an asset-based loan, a company can have a new business line of credit, giving it a ready source of business capital with the maximum flexibility possible. And for small and midsize firms, business factoring, an incredibly powerful and versatile tool, could very well be the only source of working capital financing available apart from the private funds of the owners.

Traditional methods of business financing, such as bank loans, private investors, and venture capital can be quite cumbersome and restrictive. In addition to its many benefits, accounts receivable financing offers a relatively hassle-free way to move your company forward.

Find out how accounts receivable financing can help your company prosper today!