If your business needs working capital and has outstanding invoices, you may be considering accounts receivable financing. Factoring is a common way of obtaining money when cash flow is tight. Here are four benefits of accounts receivable financing.

  • Quicker than Traditional Loans. Accounts receivable financing doesn’t take as long as getting a bank loan. You can often get a decision in as little as a week. This lets you get cash into your accounts quickly.
  • Your Business Has Less Risk. When you factor invoices, the invoices are the collateral. You don’t give up equity. And you aren’t leveraging any of your other assets. You don’t have to worry about high-interest rates. There’s no loan payment, which means your business can better project the future. 
  • Based on the Customer’s Credit. Lenders look at your customer’s credit history rather than your personal or business credit. If you are a new business without strong credit, this can benefit you by getting your short term financing. Plus, your lender takes over some of the accounting details, leaving your team to focus on your business.  
  • Your Business Avoids Debt. With accounts receivable financing, your business doesn’t take on more debt. You’re selling an asset rather than taking out a loan. When the customer pays the invoice, the transaction is complete. It can help you keep from overextending yourself and getting a too-high debt-to-income ratio, which can be damaging to your long-term business goals.  

What Are the Pitfalls With Accounts Receivable Financing?

Your business should work with a reputable lender that is transparent with you concerning fees. Don’t just sign a contract without reading the fine print. Accounts receivable financing is a little more expensive than a traditional loan, but sometimes, the benefits can outweigh the downside. 

Get more information about accounts receivable financing from the financial specialists with OneClick Commercial Funding. Contact us to see how factoring can fit into your strategy.