Accounts Receivable Financing

Accounts Receivable Financing, otherwise known as Factoring, or Invoice Financing, is a method of funding your business when you can’t wait the traditional 60-90 days for your invoices to be paid.

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Accounts Receivable Financing

What Is Accounts Receivable Financing?

Accounts Receivable Financing (Factoring) is a financial practice where businesses sell their invoices to a third party at a reduced price. This enables your business to receive immediate cash while the factoring company handles collecting payment from customers. Factoring is beneficial for small and medium-sized businesses in industries with long payment terms such as manufacturing, distribution, and staffing, as it helps improve cash flow and working capital management.

How does a Accounts Receivable Financing Work?

Although there are numerous types of Accounts Receivable Financing (factoring), we offer full notification, non-recourse factoring.

  • This means that account debtors (your customers) are notified to pay our factor directly while the credit risk of non-payment is assumed by the factor.
  • It also means we do not care about the financial condition of you or your business, but rather, the quality of your business’s accounts receivable.
  • This allows us to fund businesses most other lenders won’t.

How Can I Use My Accounts Receivable Financing?

You can use your Accounts Receivable Financing for situations such as:

  • Improving cash flow from slow-paying clients
  • If you are a new company, small company, or startup, you can use the funds to stabilize your business during difficult periods
  • If you are trying to turnaround a troubled company, the company’s financial statements often don’t look good enough to get bank financing. Unfortunately, this is exactly when you need financing the most, which is where factoring can help
  • Realization of Supplier Discounts
  • Project Financing
  • Preparation for High Season

How Can I Qualify For Accounts Receivable Financing?

It simply depends on the quality of your clients/customers. We will be looking at your customers credit worthiness and THEIR ability to pay their invoices. This means if you, as an owner, have credit/character issues, it will not impact your ability to obtain financing.

What Are The Advantages of   Accounts Receivable Financing?

Immediate cash flow/liquidity

  • By unlocking the cash tied up in unpaid invoices, your business can invest in new equipment, bolster your inventory and capitalize on early payment discounts offered by suppliers
  • Unlike traditional loans, factoring does not burden your business with debt or monthly repayment obligations. It is a flexible financing solution that enhances cash flow and optimizes your business operations.

 

No need for collateral

  • When it comes to factoring, one of the major advantages is that the outstanding invoices are considered collateral. This means your business can enjoy immediate cash flow benefits and access to working capital without the need to secure the financing with assets.
  • Unlike traditional loans, where collateral is a key requirement, factoring relies on the creditworthiness of a company’s customers. This makes it an excellent option for small businesses or those that have limited assets to offer as collateral.

 

Protection from bad debts

  • How do you know your clients will pay their invoices? Do you have a fulltime credit analyst on staff? Our factor does!
  • Factoring provides your business with a safeguard against bad debts by shifting the responsibility of non-payment to a factoring company. This ensures your business can concentrate on its daily operations without the added hassle of pursuing late payments or dealing with unreliable customers.
  • Our factor will assess the creditworthiness of your clients before purchasing their invoices, minimizing the risk of partnering with financially unstable clientele. By taking charge of collecting outstanding amounts in case of non-payment, we save businesses precious time, energy, and resources. As a result, your company enjoys a more reliable cash flow, bolstering your financial stability and enabling you to focus on your growing operations.

 

Higher credit limits

  • Unlike traditional lenders who rely heavily on credit history and/or collateral, factoring takes a different approach. Our factor will evaluate credit limits based on the value of your business’s accounts receivable, including invoices and receivables. This means your business can tap into your existing potential, gaining access to more working capital to fulfil financial obligations, pay suppliers promptly, and seize growth opportunities as they arise.
  • With increased credit limits through factoring, the potential for your business growth becomes a reality. You can navigate the delicate balance between managing cash flow and pursuing expansion plans. By leveraging the strength of your sales and relationships with customers, your business can break free from the constraints of traditional lending criteria, facilitating your journey towards financial stability and success.

What Are The Disadvantages of Accounts Receivable Financing?

  • One notable disadvantage is the potentially high cost associated with factoring, especially for businesses with narrow profit margins. These fees can impact the overall financial health of a business. The higher fees associated with non-recourse factoring are due to the increased level of risk assumed by the factor. In this type of arrangement, the factor takes on the credit risk for unpaid invoices, which translates to higher costs for the businesses utilizing this service.
  • Additionally, factoring entails relinquishing control over the collection process and customer relationships, which can disrupt the seamless operations of a business.

Pros

Cons

How to Apply for Accounts Receivable Financing?

Start by giving us a call, or fill out the Contact Us form, and describing your business:

  • location
  • year founded
  • if your a B2B
  • sector
  • annual revenue
  • your desired loan amount
  • reason for the funds

 

We’ll discuss the program in detail.

If you decide to proceed, you will then need to provide us the following items:

  • Year-end financial statements for the last two years
  • Most recent month-end (YTD) financial statements
  • Most recent month-end accounts receivable aging
  • Most recent month-end accounts payable aging
  • List of owners/shareholders (cap table)
  • Company bank statements for the last three months (include all bank accounts)
  • Federal tax return for the last calendar year
  • Budget/Pro-forma/Projections for the coming year

 

Not all our factors require all this information, but this is a full intake checklist and will speed up the approval process if provided.

What If I am Declined for Accounts Receivable Financing?

If you are declined, it will most likely be due to the credit worthiness of your customers. Not to worry. We have a host of other loan products and access to over 50+ lenders. We will ensure that your financing goals are met.

What is Accounts Receivable Financing?

Accounts Receivable Financing (Factoring) is a financial practice where businesses sell their invoices to a third party at a reduced price. This enables your business to receive immediate cash while the factoring company handles collecting payment from customers. Factoring is beneficial for small and medium-sized businesses in industries with long payment terms such as manufacturing, distribution, and staffing, as it helps improve cash flow and working capital management.

How does Accounts Receivable Financing work?

Although there are numerous types of Accounts Receivable Financing (factoring), we offer full notification, non-recourse factoring.

  • This means that account debtors (your customers) are notified to pay our factor directly while the credit risk of non-payment is assumed by the factor.
  • It also means we do not care about the financial condition of you or your business, but rather, the quality of your business’s accounts receivable.
  • This allows us to fund businesses most other lenders won’t.

How can I use my Accounts Receivable Financing?

You can use your Accounts Receivable Financing for situations such as:

  • Improving cash flow from slow-paying clients
  • If you are a new company, small company, or startup, you can use the funds to stabilize your business during difficult periods
  • If you are trying to turnaround a troubled company, the company’s financial statements often don’t look good enough to get bank financing. Unfortunately, this is exactly when you need financing the most, which is where factoring can help
  • Realization of Supplier Discounts
  • Project Financing
  • Preparation for High Season

How can I qualify for Accounts Receivable Financing?

It simply depends on the quality of your clients/customers. We will be looking at your customers credit worthiness and THEIR ability to pay their invoices. This means if you, as an owner, have credit/character issues, it will not impact your ability to obtain financing.

What are the advantages of Accounts Receivable Financing?

Immediate cash flow/liquidity

  • By unlocking the cash tied up in unpaid invoices, your business can invest in new equipment, bolster your inventory and capitalize on early payment discounts offered by suppliers
  • Unlike traditional loans, factoring does not burden your business with debt or monthly repayment obligations. It is a flexible financing solution that enhances cash flow and optimizes your business operations.

 

No need for collateral

  • When it comes to factoring, one of the major advantages is that the outstanding invoices are considered collateral. This means your business can enjoy immediate cash flow benefits and access to working capital without the need to secure the financing with assets.
  • Unlike traditional loans, where collateral is a key requirement, factoring relies on the creditworthiness of a company’s customers. This makes it an excellent option for small businesses or those that have limited assets to offer as collateral.

 

Protection from bad debts

  • How do you know your clients will pay their invoices? Do you have a fulltime credit analyst on staff? Our factor does!
  • Factoring provides your business with a safeguard against bad debts by shifting the responsibility of non-payment to a factoring company. This ensures your business can concentrate on its daily operations without the added hassle of pursuing late payments or dealing with unreliable customers.
  • Our factor will assess the creditworthiness of your clients before purchasing their invoices, minimizing the risk of partnering with financially unstable clientele. By taking charge of collecting outstanding amounts in case of non-payment, we save businesses precious time, energy, and resources. As a result, your company enjoys a more reliable cash flow, bolstering your financial stability and enabling you to focus on your growing operations.

 

Higher credit limits

  • Unlike traditional lenders who rely heavily on credit history and/or collateral, factoring takes a different approach. Our factor will evaluate credit limits based on the value of your business’s accounts receivable, including invoices and receivables. This means your business can tap into your existing potential, gaining access to more working capital to fulfil financial obligations, pay suppliers promptly, and seize growth opportunities as they arise.
  • With increased credit limits through factoring, the potential for your business growth becomes a reality. You can navigate the delicate balance between managing cash flow and pursuing expansion plans. By leveraging the strength of your sales and relationships with customers, your business can break free from the constraints of traditional lending criteria, facilitating your journey towards financial stability and success.

What are the disadvantages of Accounts Receivable Financing?

  • One notable disadvantage is the potentially high cost associated with factoring, especially for businesses with narrow profit margins. These fees can impact the overall financial health of a business. The higher fees associated with non-recourse factoring are due to the increased level of risk assumed by the factor. In this type of arrangement, the factor takes on the credit risk for unpaid invoices, which translates to higher costs for the businesses utilizing this service.
  • Additionally, factoring entails relinquishing control over the collection process and customer relationships, which can disrupt the seamless operations of a business.

Pros and Cons of Accounts Receivable Financing

Pros

Cons

How to apply for Accounts Receivable Financing?

Start by giving us a call, or fill out the Contact Us form, and describing your business:

  • location
  • year founded
  • if your a B2B
  • sector
  • annual revenue
  • your desired loan amount
  • reason for the funds

 

We’ll discuss the program but almost every question is answered on this webpage.

 

If you decide to proceed, you will then need to provide us the following items:

  • Year-end financial statements for the last two years
  • Most recent month-end (YTD) financial statements
  • Most recent month-end accounts receivable aging
  • Most recent month-end accounts payable aging
  • List of owners/shareholders (cap table)
  • Company bank statements for the last three months (include all bank accounts)
  • Federal tax return for the last calendar year
  • Budget/Pro-forma/Projections for the coming year

 

Not all our factors require all this information, but this is a full intake checklist and will speed up the approval process if provided.

What is I am declined for Accounts Receivable Financing?

If you are declined, it will most likely be due to the credit worthiness of your customers. Not to worry. We have a host of other loan products and access to over 50+ lenders. We will ensure that your financing goals are met.

Accounts Receivable Credit Facility, Rate, Term and Time to Fund

Frequently Asked Questions

How does Accounts Receivable Financing Compare to Other Small Business Loan Options?

Financing TypeFinancing AmountInterest RateTermTime to Fund
Accounts Receivable Financing$10k – $10M (advance rate of up to 90%)1% – 2% p/mo3 months – 5 years1 – 3 business days
Business Line of Credit$5k – $1MStarting at 1% p/mo12 – 36 months7 – 14 days
Equipment Financing$10k – $25M1% – 2% p/mo12 – 72 months1 – 3 business days
SBA 7a Loan$350k – $5M9% – 12% fixed5 years – 25 years30 – 45 days
Supply Chain Financing$250k – $25M1% – 2% p/mo30 – 150 days (re-usable)2 – 3 weeks
Unsecured Business Line of Credit$5k – $100k1% – 2% p/mo1 – 2 years1 – 3 business days
Accounts Receivable Financing
Financing Amount$10k – $10M (advance rate of up to 90%)
Interest Rate1% – 2% p/mo
Term3 months – 5 years
Time to Fund1 – 3 business days
Business Line of Credit
Financing Amount$5k – $1M
Interest RateStarting at 1% p/mo
Term12 – 36 months
Time to Fund7 – 14 days
Equipment Financing
Financing Amount$10k – $25M
Interest Rate1% – 2% p/mo
Term12 – 72 months
Time to Fund1 – 3 business days
SBA 7a Loan
Financing Amount$350k – $5M
Interest Rate9% – 12% fixed
Term5 years – 25 years
Time to Fund30 – 45 days
Supply Chain Financing
Financing Amount$250k – $25M
Interest Rate1% – 2% p/mo
Term30 – 150 days (re-usable)
Time to Fund2 – 3 weeks
Unsecured Business Line of Credit
Financing Amount$5k – $100k
Interest Rate1% – 2% p/mo
Term1 – 2 years
Time to Fund1 – 3 business days

Do I have to use all my customers invoices as collateral?

No. Some of our factors do require access to all your customers and their corresponding invoices, but others allow you to cherry pick which customers and which invoices you’d like to use as collateral, even down to a single invoice

How far out can my invoice terms be?

Our factors will accept invoice terms up to 120 days, but generally prefer up to 90 days

Ready to take the next step and apply for Accounts Receivable Financing?

Free Consultation – No Obligation

Give us a call to see how we can help your business