Reasons to Use Accounts Receivable Financing

Needing additional capital is nothing new for business owners. Most businesses need a little financial assistance now and again. The thing is, however, sometimes you need money quickly. In such cases, waiting for a traditional loan doesn’t work. If you send invoices to your customers and you need fast funds to run your business, accounts receivable (AR) financing may be the right option. Here’s why you should consider it.

You Get Access to Working Capital Quickly

Loans can take weeks to process. If you have bills to pay, you can’t wait that long. Waiting for your customers to pay their invoices, however, can keep you doing what you need to do to ensure the success of your business. The application process for accounts receivable financing is much shorter, and decisions are made quickly. You can have your funds within a week, if not a couple of days.

Your Financing Isn’t Based On Your Credit

If you don’t have the best credit, getting approved for a loan is much less of a possibility. Traditional lenders especially look for good to excellent credit before they’ll lend money. If your credit isn’t stellar, you’re stuck with higher interest rates. With AR financing, your ability to get funding isn’t based on your credit, though; it’s based on the creditworthiness of your customers. If they have great credit, you’re more likely to be approved, even if your credit isn’t that good.

You Don’t Need to Provide Additional Collateral

With traditional financing, you often need to provide collateral. It might be in the form of business assets or personal ones. The thing is, though, you might not have much to provide. AR financing uses the invoices as collateral, so you don’t need to worry about risking anything else.

You Avoid Accruing Additional Debt

Loans are great, but you have to pay them back. Not every business can afford to take on an additional monthly payment.

AR financing isn’t technically a loan. You’re taking out an advance on money your customers already owe you. You’re essentially selling the unpaid invoices at a discount. Your customers then pay the lender. With no additional debt, you don’t have to worry about making additional monthly payments, which can be especially helpful if margins are already tight.

Loans work in some cases, but not all. In some cases, accounts receivable financing makes the most sense. Research different lenders, compare your options, and get the money you need to keep your business going strong.

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