If you run a business that provides goods or services and then invoice your customers, you already know the difficulties that waiting for your money can bring about. Even in good times, certain companies wait 30, 60, or even 90 days before they are paid. In some cases, the wait can be longer. These long delays can have a real effect on a company’s cash flow and its own ability to pay its bills and payroll. This is when taking out a receivable loan can help.
A receivable loan, also known as accounts receivable loan, is not an added form of debt to your company. In simple terms, once you invoice your customer for goods or services that they have received, you can turn that invoice over to a factoring company (once you have an account with one), and they will pay you a large percentage of the value of the invoice immediately. They will collect on the invoice, and once that is completed, the factoring company will deduct their fee and send you whatever is above that fee.
There are several benefits to using invoice factoring and these include fast payments. This can be especially important for those companies that must meet payroll requirements. Fast payments are also essential for those manufacturing companies that must reorder supplies and materials in order to produce new goods to replace those that were sold. When companies use accounts receivable invoice factoring they can use that immediate inflow of cash as they wish.
Another benefit to AR factoring is that newer companies, even startup companies, can take advantage of these programs. There are no collateral requirements and companies do not need to have existing lines of credit. The receivable loan is based on the invoice and the customer, not so much on you or your company. There are no long complicated financials to be filed, and many companies can set up an AR factoring account in just a few days. Once the account is set up, payment on invoices submitted can be realized in hours, rather than weeks or months.
Some types of companies will see another big benefit to using invoice factoring in that your staff will no longer have to handle reams of invoices, collection attempts, and paperwork that never seems to end. The factoring company, once they accept the invoice, will do the vast majority of that back-end work, leaving your employees free for other important tasks.
Keep in mind that some of the largest and most well-respected companies now use invoice factoring on a regular basis. It is an established way of helping companies, of all sizes, to get the steady flow of cash that they need to keep their operations running smoothly. If your company needs to get its money faster, and you need a few requirements, receivable loans may be the best solution. Don’t jeopardize your company over delayed payments when invoice factoring is so easily available.