Owners of new companies often come up against situations in which they require additional financing. The reason for this may be an upsurge of business, customers who are slow to pay, or an accumulation of bills. Their first step is usually to explore traditional methods of funding, but when these are unavailable, they consider alternatives. Here is how you can use accounts receivable financing, also known as AR financing, to meet the needs of your business.
Funding Possibilities
Financing a business with a loan from a traditional bank is often out of the reach of startup owners and entrepreneurs. Most do not have the required credit history; additionally, the process of approval can take weeks or even months. New business owners might then consider using their personal savings, but few startup owners or entrepreneurs have access to the amount of funds needed. Venture capital funding is attractive, but very few applicants are successful in obtaining it. This brings us to AR financing, which enables you to use your unpaid accounts receivables to get the cash you need.
The Process of AR Financing
The first step in AR financing is to set up an account with the factoring company you have chosen. You will need to give the financer details about your business and its corporate taxes, liens, and the credit profiles of your customers. Next, you select the invoices that you will use for funding and submit them to the factoring company. The financing company will verify the invoices and then deposit the funds you need into your company’s account, often within 24 hours.
Advantages of AR Financing
AR financing is available to companies without high credit scores, because factoring companies are more concerned with the creditworthiness of your clients. Although the application process for most methods of financing is lengthy, obtaining AR financing can generally be accomplished extremely quickly, so you can have the funds you need expediently. When you compare it with other options for funding, AR financing is also affordable.
For more advice on obtaining AR financing for your business, contact Spearing Capital & Consulting, Inc.