Every business needs cash to operate. However, sometimes cash is slow to roll in from sales, and sometimes customers are slow to pay their invoices. Accounts receivable financing is a good way to get paid on-time to receive cash that the business needs.
Why is Good Cash Flow Important?
A business with good cash flow will be able to pay its bills on time, handle operating expenses, plan its working capital without overspending, invest in new products or services, deal with seasonal business fluctuations, and grow. As an important component of cash flow, accounts receivable can be outstanding for a long time. Delays in payment due to overly generous terms or due to the abuse of flexible payments can result in cash flow problems. Accounts receivable financing can address the delays and secure needed cash quickly.
What is Accounts Receivable Financing?
Accounts receivable financing is simply the sale of some outstanding accounts to a financial institution at a discount in return for a cash payment. A direct cash payment is made to the company and the financial institution takes on the risk of the receivables.
What are the Benefits of Accounts Receivable Financing?
The primary benefit of accounts receivable financing is to get funds almost immediately, instead of waiting for customers to pay. This results in getting additional funding for business operations such as purchasing inventory or raw materials. Accounts receivable financing can provide stability to cash flow without cumbersome credit requirements and without collateral. A business does not lose control of its business. However, there are higher costs for accounts receivable financing.
Accounts Receivable Financing Mistakes
Avoid the mistakes of having poor quality accounts receivable and poor documentation, not having a plan for the use of accounts receivable funds, and not managing properly the use of those funds.
Seek Expert Financing Assistance
Contact Spearing Capital & Consulting, Inc., based in Tampa, FL for your financing needs. With a strong portfolio of financing options, we have deep experience assisting businesses to secure the financing they need to grow and flourish.