Fast financing can be hard to find, especially for small businesses. Often, the best choice is to skip over traditional term loans entirely and focus on an alternative financing method based on your business assets. For many companies, accounts receivable financing winds up being the best fit for both cost and convenience.
To make use of AR financing, your business must use invoice-based billing and receivables management. Cash businesses have other options like inventory credit lines and merchant cash advances. As long as you use invoice billing, you can access this financial tool no matter what industry you work in, and that means being able to take advantage of the unique structure offered by an advance against your invoice payments.
1. Outsource the Work Involved With Receivables
Tracking payments and following up on collections messaging when clients fall behind can be a lot of work. Whether you handle it yourself, hire staff, or contract the workout, there tends to be a fair amount of overhead to absorb. Financing your accounts means turning over that process to the lender, allowing you to focus on your core business without incurring the service fees associated with most outsourced operations. That lowers the net cost of financing your accounts considerably.
2. Gain Control Over Your Cash Flow
Scheduling regular rounds of accounts receivable financing a couple of times per quarter can keep your invoices rotating and your income flowing through the company smoothly. That allows you to plan on large sums of operational cash at the points where you need to be sure you can meet outgoing cash flow obligations. It is the perfect way to keep operations moving smoothly because it saves you labor and your lender generally offers you a better price for the advance when you have a regular relationship that allows the financing company staff to learn about your business.
3. Access Working Capital as Needed
You do not need to use an advance against your receivables for cash flow. If your existing processes provide you with easy cash management solutions, using accounts receivable financing to drum up working capital for special projects could be a great move. Not only does AR financing avoid adding new debt to your credit report, but it also gives you the chance to access funds in just a couple of days. If you have an opportunity like a surprise order and you need extra staff or supplies, it might even be the fastest path to your money.