Finding ways to keep capital in your company can be a big task, one that comes with time and effort in researching the best financial choices available for your business. Utilizing accounts receivable financing can prevent you from having to take out a loan and may be a reasonable solution to your financial needs. 

What is Accounts Receivable Financing?

An accounts receivable financing option focuses on selling outstanding invoices or assets at a discounted price or loaning collateral for a rate based on the collection of the debt. The company that purchases your assets or invoices will provide your business with a lump sum of funds, relieving you of any obligation to your past due invoices. The amount your company receives for this type of financing will depend on the age of the accounts you’re selling, along with the quality of the account the company is taking over.

The form accounts receivable financing takes can come in a couple of ways.

• Selling company assets in return for cash.
• Holding the AR book as collateral based on the collection of debt.

What are the Perks of Accounts Receivable Financing?

If your business needs additional capital, but you don’t think you’ll qualify for a traditional loan, or you simply don’t want to open up a line of credit, then accounts receivable financing can be an attractive option.

Selling assets and invoices allows for additional funding for your company without the stress of an extensive loan process and can get you a sum of funds without the stress of dealing with past due receivables. Choosing the other option of holding the AR book as collateral and allowing another business to collect on the debt based on an attractive rate, allows your company to not have the stress of dealing with the debt collection process internally.

With this type of funding, you’re not sharing ownership of your company, you’re expanding your cash flow, and you’re garnering financial relief by selling unpaid bills or assets. 

What are the Pros of Accounts Receivable Financing?

Although you can garner cash quickly with accounts receivable financing, receivable contracts can be longer than you would like. The rate for your assets could come at a less attractive offer, which is part of the cost of garnering funds quicker. 

Although there are pros and cons to accounts receivable financing, it can be a viable option if your business needs a quick money fix. Traditional lenders have made obtaining loans and credit a lot harder to access, and utilizing accounts receivable financing can help your company overcome that barrier.