If you’re a business owner, you know that having a healthy cash flow is essential to keeping your operations running smoothly. But what do you do when you need working capital but don’t have the liquid assets to cover it? One option is accounts receivable lending.
What is a accounts receivable lending?
Accounts receivable lending is a type of short-term funding that allows businesses to borrow against their outstanding invoices. In other words, you can use your outstanding receivables as collateral to secure a loan. This can be a helpful solution if you need working capital but don’t have the collateral to qualify for a traditional bank loan.
How does it work?
The process of accounts receivable lending is relatively simple. First, you submit your invoices to the lender. The lender will then review the invoices and advance you a portion of the total amount (usually between 70-80%). Once your customer pays the invoice, the lender will remit the remaining balance to you, minus a small fee. Most lenders will also offer you the option to roll your invoices into a longer-term funding agreement so that you can take out advances on a regular basis.
Why consider accounts receivable financing?
There are many reasons to consider using accounts receivable financing. Here are just a few:
You can get access to capital quickly. Accounts receivable funding can provide you with a quick influx of cash, often within 24 hours. This can be crucial if you find yourself in the midst of a cash flow crunch.
You can use the financing to take advantage of opportunities. If you have the opportunity to buy inventory at a discount or hire a new employee, you can use accounts receivable financing to access the capital you need to take advantage of these opportunities.
You can free up working capital. By using accounts receivable financing, you can free up working capital that is tied up in your unpaid invoices. This can give you the flexibility to invest in other areas of your business.
What are the benefits?
There are several benefits of accounts receivable lending, including:
- Fast access to capital: Unlike a traditional bank loan, which can take weeks or even months to secure, accounts receivable lending can provide you with funding in as little as 24 hours.
- Flexible repayment: With accounts receivable loans, you only have to make repayments when your customers pay their invoices. This can give you some much-needed flexibility when it comes to managing your cash flow.
- No collateral required: One of the biggest benefits of accounts receivable lending is that it does not require collateral. This means that even businesses with limited assets can qualify for this type of financing.
If you’re looking for a way to get access to working capital, accounts receivable lending may be the solution you need. Talk to a lender today to see if this type of financing is right for your business.
