Factoring receivables, otherwise known as accounts receivable financing, can have many advantages over traditional financing. Under this kind of financing, business owners sell a share of and the management of their accounts receivable to the lender. The lender returns a percentage of the revenue to the business, making this a mutually beneficial arrangement on both sides. Here are some of the benefits of this type of financing.
Based on Your Customers’ Credit
Whereas in conventional lending or other traditional loan programs have to perform a thorough review of your small business’s credit rating, this type of financing structure does not, and can generally close much quicker than other lending alternatives. The underwriting process for this type of lending structure is quicker, meaning you can get the money you need to get going on your business faster without having to wait for quarter- or year-end reports as you might have to with other types of lending programs.
Get Financing Without a Loan
Although it is referred to as financing, factoring receivables is not actually a loan. The factoring company purchases the accounts receivables of your business. The benefit here to you is that this arrangement will not show up on your debt balance sheet as a debt. Otherwise, this might make it more difficult for you to obtain conventional loans, other types of financing, or credit through your business.
Grows with Your Business
Because factoring receivables depends on the money, your customers are sending in, you will be able to get more funds as your business grows. Make sure when you initially choose this option that you carefully analyze the factoring company providing the loan. Doing so will help ensure that you work with a company capable of future business expansion.
Qualify for Larger Amounts
You can often get larger amounts of capital for your business startup costs or whatever else you might; need the financing for with this type of financing. The reason for this is that small businesses that have many accounts receivables may be able to qualify for more money right up front because the decision is based on your customers’ credit rather than yours as the business owner. As is often the case, the factoring company might be able to get you a larger loan quicker than banks or other lending institutions might be able to.
Talk to Our Professionals
Factoring receivables can be a great option for many reasons and if you are considering it, it is best that you educate yourself and talk to one of our representatives about your many different options before settling on one decision. Learn more about our Accounts Receivable Financing Program or Contact us with your needs today!