Like many businesses that need financing, you may think a traditional bank or other lender is your only option. However, you may have overlooked an unlikely source of financing that's been under your nose the whole time, which is accounts receivable financing.
What is this, and how can it help your business? Here's what you need to know.
In essence, accounts receivable financing lets your company receive early payment on some of its outstanding invoices. Should you choose this form of financing, you will then commit some or all of your outstanding invoices to a funder who specializes in this area of business. When you do, you will receive early payment in return for paying a fee to the funder.
Though there are other types of accounts receivable financing, such as asset-based lending and traditional factoring, you will probably do best if you opt for selective receivables financing.
Ability to Receive Early Payments
In essence, accounts receivable financing lets your company receive early payment on some of its outstanding invoices. Should you choose this form of financing, you will then commit some or all of your outstanding invoices to a funder who specializes in this area of business. When you do, you will receive early payment in return for paying a fee to the funder.
Selective Receivables Financing
Though there are other types of accounts receivable financing, such as asset-based lending and traditional factoring, you will probably do best if you opt for selective receivables financing.
This is a good choice for staff agency business financing, since it gives you the freedom to decide which receivables you will select for early payment while also ensuring you will get paid for the full amount of the receivable. Best of all, financing rates for this option are usually lower, and it will not count as an additional debt against your business.
Improves Your Cash Flow
One of the biggest benefits of using accounts receivable financing is that it can immediately improve your company's cash flow. Rather than hoping your invoices will be paid on time by customers, you can get the money you need much quicker and more reliable.
Doing so gives you the cash to buy new equipment, invest in new technology, or hire new employees. Consider talking to financial experts about this decision if you lack peace of mind.
Now that you know more about this source of financing for your business, it may be time to rethink your plans about putting off buying that new equipment, investing in new software, or hiring that new employee. With the cash you need in your hand, you can move forward and keep your business growing.
Now that you know more about this source of financing for your business, it may be time to rethink your plans about putting off buying that new equipment, investing in new software, or hiring that new employee. With the cash you need in your hand, you can move forward and keep your business growing.
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