If there’s one thing every business needs, it’s cash flow. Without cash, a business can’t operate fully or effectively because there’s a lack of capital. Cash is what keeps your company operating as it pays the bills, pays for marketing, buys the materials and equipment to run your business, and keeps you going.
If you don’t have a constant cash flow, you may find yourself wondering how you’ll keep operating. Accounts receivable financing is a viable financing method that provides you access to cash fast without heavy underwriting requirements or lengthy waiting periods. Available for companies of all sizes and ages (even new businesses), AR financing is a viable way to help your company flourish.
Just how can AR financing help your company? Check out the various ways below.
Get Access to Cash Fast
Think of your billing cycle. How long do you give your clients to pay you? Is it 30, 60, or 90 days? While providing your clients with flexibility may help you take on more clients, the lack of cash flow can hurt you eventually. Accounts receivable financing gives you access to the cash quickly – typically in a day or two of applying for the loan.
Underwriting Guidelines are Flexible
Unlike a standard business, loan, AR financing is easy to qualify for even for new businesses. You don’t have to worry about your business’s credit score or even debt-to-income ratio. AR companies look at other factors to determine your eligibility including:
- The industry your business is in
- The creditworthiness of the clients with outstanding invoices
- The number of outstanding invoices
This makes it easy even for new businesses to get access to cash flow, allowing you to continue to operate despite the outstanding invoices.
Accounts Receivable Financing Helps you Build Business Credit
Accounts receivable financing increases your company’s cash flow. Higher cash flow means you’ll meet your own obligations on time. When you pay your vendors on time, you build your business credit history favorably. Just like your personal credit, when you pay your bills on time, your credit score increases. This is great for both new and established businesses as new vendors as well as banks and credit card companies use your business credit score to determine your eligibility for other financing options.
Leave Your Business Equity Alone
Traditional business loans require you to put up collateral, which means a part of your business. Just like a mortgage, when your house is on the line if you don’t pay it, you run the risk of losing your business if you don’t pay your business loans. Accounts receivable financing uses the invoices as collateral rather than a part of your business. While you still have to pay the debt, you don’t have to worry about losing a part of your business as a result.
Your Access to Capital Continually Grows
Accounts receivable financing helps your company continually grow with the times. The more you can invoice, the more cash flow you’ll have access to on an ongoing basis. In other words, your AR financing grows with your sales. If you strike gold and take on a few large clients, you’ll increase your cash flow even while you wait for your clients to pay the invoices.
Bridge the Gap in Downtimes
All businesses face downtimes. It usually happens when you need the cash the most too. If you’ve had the business, but are just waiting for invoices to be paid, AR financing can help bridge the gap. This helps reduce the risk of paying your bills late, which can hurt your chances of taking on new business if vendors or banks stop doing business with you.
AR Financing Helps you Plan
It’s hard to plan for the future when you don’t have constant cash flow. How will you ever grow your business, take on bigger clients, or expand your product selection if you don’t have the cash flow? AR financing helps solve this problem by providing you with constant cash flow based on your outstanding invoices. As long as you have the cash coming in and it’s from clients that typically pay their bills on time, you can access the cash now, allowing you to create plans for the future to expand your business or just keep it operating.
Accounts receivable financing helps you keep the cash flow going in your business. Cash is king because without it, you can’t keep your business up and running or even think of expanding it. As a business owner, you need to think proactively so that you can always be one step ahead of the competition. If you want to stand apart from the crowd, serve your clients, and continually expand, proper cash flow is essential.