When you’re operating your own company, sometimes it’s hard to find enough cash at times to make all the bills. This can be far trickier when your business mostly deals with invoices for services rendered. When you’re waiting for the other company to pay their account, it might be difficult to have enough money to get everything else done. Fortunately, that’s where accounts receivable financing can offer a helping hand. There are a few methods to receiving funds from your outstanding invoices, and chances are, one of those methods will be right for you.
Learn about Factoring
One of the most popular ways that companies participate in accounts receivable financing is through the means of factoring. With this practice, a company takes its outstanding invoices to a funding company that essentially buys the invoices. This factoring company will then advance you the majority of the amount of the invoice right off the bat. The amount usually falls in the area of eighty percent of the original invoice balance. The factoring agency then attempts to collect payment from the other company that owes money. Once these funds are collected, you will then receive the remainder of the balance minus fees that are set by the factoring company for their services.
Understand Asset-Based Lending
Another way that companies can get funding via accounts receivable financing is through asset-based lending. Instead of going to a factor for an advance, this type of financing gives a business a loan or line of credit based on the assets from the accounts receivable. Although this is less common than factoring, it is still a popular business practice. Lines of credit can be used and then paid back much like how a credit card works. The receivables serve as an asset in this transaction and back up the amount of financing that you choose.
Get to Know Selective Receivables Finance
This option for accounts receivable financing may be more favorable than other methods depending on the company requesting it. Unlike factoring, you won’t receive a partial amount of your invoice with this method of financing. You would typically receive the amount of the full invoice, and you can be more selective about which invoices you will commit to this type of funding.
When you look into the world of financing with your accounts receivable, there are many options. One of these options is bound to work for your company. Contact Point High Finance for more information today.