How To Determine if Accounts Receivable Financing Is a Good Fit for Your Business
Your business is on a path to success; however, there is one place you keep falling short: cash flow. Customers have up to 60 days to pay invoices for goods and services. While this is standard, it is not ideal when you need money now. There are ways that you can get the cash you need and keep your customers on the same timeline. Accounts receivable financing is one way to get the cash flow up while you’re waiting for bills to get paid.
What Do Financing Companies Look For?
Companies that handle this type of financing for businesses look at a few factors before determining your eligibility for help. The company will perform some due diligence into the following areas:
- The average age of your receivables
- Your background history
- When you pay your corporate taxes
- The creditworthiness of your customers
- Any liens that may already encumber the invoices
Once the company investigates the above, they will set up an account and start the financing process.
How Complicated Is the Process?
Accounts receivable financing is pretty straight forward and only requires the initial setup. Once you are approved, you will select the customers whose invoices will be handled through the company. The process is pretty straightforward from there. The finance company contacts the customers to make sure the invoices are correct and that they haven’t made any recent payments. Once this step is complete, the processing commences.
What Happens After Verification Is Complete?
After the financing company has what it needs to confirm the money being billed is collectible, it calculates how much money is expected from the invoices. They then take a percentage of the money and deposit it into the account they set up with you. The rate you get depends on the arrangement you have set up. Some companies may take, say, 20 percent as their fee. The company deposits your share, collects the money from the customers directly and keeps the remaining amount as payment.
What Is the Benefit of Accounts Receivable Financing?
You need money in your account to keep the doors open. You have bills to pay and can’t wait for all your outstanding invoices to come due. This type of financing allows you to get that money in advance and keep cash flow positive month after month. Eventually, you may be able to stop utilizing the services of a finance company, but until then, it is a great option.
If you aren’t sure how you can get more money flowing into your business consistently, consider going with an accounts receivables finance company. It’s a win-win for everyone.
