Using your commercial Accounts Receivable as a factoring solution

Using your commercial Accounts Receivable as a factoring solution

Your business provides some excellent products and services, and customers love you! You have several customers who have returned to you time after time and spent quite a lot of their hard earned money on your offerings. As a result, you have extended them a line of credit and allowed payments to be made in installments. This is your commercial account receivables, and it can be a powerful piece of collateral to expand and grow your business. When the time comes that you want to expand your business, improve your advertising and marketing, or add an additional line of inventory you are going to need funds to make it happen. This is where your AR will come in handy.

Avoiding the traditional bank loans

Factoring firms will buy your accounts receivable invoices and provide an advance on those funds. This means you can purchase additional inventory or marketing before the customer has even paid their invoice. Yes, you could go the traditional route and use a bank to get a business loan to get the same funding – but are you prepared for the limitations on account access, restrictions on funding amounts, demands placed on your business and insane amounts of fees they add? If not, working with a factoring firm is the best option. For one thing, banks require businesses to have a high credit score, usually above 740, which leaves startup businesses and smaller businesses completely out of luck; in fact, many midsize businesses are below 740 and still thriving just fine. Factoring firms, on the other hand, look at the credit risk of your customers who hold the invoices and not the credit rating of your business. So, even small businesses with invoiced accounts receivables can be approved for advanced funds through a factor.

Maximum flexibility for your funds

Don’t be restricted to the limitations put in place by banks. In many cases, they are governed by state and federal laws, which can be put in place to benefit large corporations more than the smaller companies. If you do work with a factoring firm for an advance on your AR, be sure you have flexibility with your account. Do you have access to it 24/7? Is the account protected by trusted online security systems? If not, don’t be afraid or ashamed to find another firm. Also, be sure you have the freedom to add additional funds as needed. The best firms won’t have any problems adding to your account as long as your AR is sufficient.

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