Many businesses are concerned about the stability of their cash flow. One solution is accounts receivable funding, also known as factoring. This involves the sale of your unpaid invoices to a financing company called a factor. You receive an advance on most of the value of the receivables, and the factor sends you the rest minus its fee when your clients pay their bills. Here are some of the benefits of factoring your accounts receivables.
Receive Funding Quickly
If you urgently need to pay your personnel, pay bills, or take advantage of unexpected business opportunities but your funds are tied up in unpaid accounts receivables, factoring is a quick way of getting the cash you require. Instead of impatiently waiting for your clients to pay up, you can obtain the cash you need and then get on with the tasks involved in growing your company.
Strengthen Cash Flow
Freeing the funds tied up in unpaid invoices through factoring gives you the strong, steady cash flow needed to pay your debts and in turn boost your business’s credit rating. With the increased financial stability, you will be able to take on new projects, open new locations, or offer new products and services to your customers.
Often the businesses that need funding the most are unable to qualify for loans and lines of credit from traditional banks. However, this is not true of factoring. Even if your company does not have an excellent credit rating, you can still qualify for factoring. This is because factors are more concerned with the creditworthiness of your clients when they consider your application.
Please Your Customers
When you factor your invoices, you are able to offer more generous credit terms to your customers because you know that factoring will free the funds tied up in unpaid receivables. This flexibility in payment terms will please your current clients and also attract new ones.
For more advice on accounts receivable factoring, get in touch with Coastal Commercial Lending.