As a small business owner, you’ve accomplished an awful lot. You’re providing a needed product to consumers every day. You’re doing it at reasonable prices, with good customer service, in a market that’s tumultuous at best. And you’re making it. Your business is growing steadily, gaining customers, tapping new markets, and rising to the top of the pile. You just have one little nagging problem. People are unreliable as a rule, especially when it comes to making payments. You sell your product on the usual credit terms, but the payments don’t come in as scheduled. Some come in just a little late, but others you have to chase down. You’re wasting time and money going after money, when you could be working on production and profit margins instead. Accounts receivable financing is the solution.
Accounts receivable financing, or factoring, is the process whereby you sell your accounts receivables to a financing company at a discounted rate. Those companies, sometimes called factors or factoring companies, give you cash in exchange for the right to collect on open invoices. Your customers mail their payments to the factoring company instead of to you. Setting up a factoring arrangement provides you with steady payments on a schedule you can count on, without forcing you to incur any excess cost. A small business loan or a credit line means you’re paying out-of-pocket for the cash you need, but factoring doesn’t add a payment to your monthly costs. That gives you steady income without impacting your payables negatively.
On top of receiving reliable payments as scheduled, you have the added benefit of an experienced receivables company on your side. Stubborn customers will be faced with the prospect of going up against a finance company that has resources you don’t have. And contrary to a collections agency, an accounts receivable financing arrangement means you’ve already been paid for the open invoice. Collections agencies get paid when you get paid, but factoring companies will pay you before the money comes in. This not only relieves you of any burden of going after money due to you, but also helps to maintain the relationship with your customers.
Take a look at accounts receivable financing if you’re in a position of waiting on customers to pay up. They provide added value above and beyond regular cash flow; they also assist you in credit checks and assessing bad risks, provide detailed monthly statements, and may even offer free credit insurance for qualifying accounts.