The Numerous Benefits Of Accounts Receivable Financing

by : Kris Koonar



It is not without reason that accounts receivable financing has been consistently gaining popularity. The benefits offered by this type of financing are too good to resist. Using accounts receivable financing improves your company's financial profile and credit rating in the market. Increasing number of companies is resorting to accounts receivable financing to meet the immediate requirement of funds for the further growth of their business.

The many benefits of accounts receivable can be summarized as follows:

Quicker cash flow: Accounts receivable financing gives you the immediate opportunity of converting your credit sales into immediate cash flow for your business. By getting your outstanding invoices or receivables monetized by a commercial financing company, you are able to get your money when you badly need it. You don't need to wait weeks and months to receive your dues from your clients. You gain immediate access to working capital for your business.

Quick funding from a financing company gives you the advantage of an enhanced credit rating by virtue of your having the funds available to make timely payments and occasionally even ahead of schedule. Now that your business has the required capital to operate at hand, there should arise no occasion to seek additional funding like venture capital. Unlike venture capital, funding from factoring companies does not require the relinquishment of your equity in the company so equity will now continue to be with you, the business owner.

Focus on your business: An easy access to a working capital frees up your resources giving you greater peace of mind. As a result you can focus on those activities that are more productive like selling and marketing. The time that you have been spending on collecting payment from your unsympathetic clients can now be devoted to building your business.

More user friendly: All businesses, small, medium or large can opt for accounts receivable financing. Setting up accounts receivable factoring lines does not take more than just a few days. Unlike a conventional bank loan you neither make any payments nor do you create debt. Besides, you have the freedom of financing as much or as little as you want. It is directly related to your sales growth. The greater your sales amount the higher would be your financing line. Factoring companies help you obtain cash discounts for payment of accounts payable early, as well as any other debt.

Additional Services offered: Most financing companies offer to manage your entire accounts receivable portfolio that includes invoice processing, reporting and posting. As a result, you have more time available for revenue-generating activities such as sales and marketing. In many cases the factoring company helps you determine the credit rating of your potential clients before you actually start selling to them.

What they actually do is they check the payment history of your clients before you formally sign them up. This significantly reduces the prospect of bad debt as you start getting better clients with a reliable track record. The chances of financial crises such as bankruptcy or your inability to pay taxes on time are eliminated. All this comes to you as a good bonus because you don't pay any additional fees for such valuable services.