Receivables Financing or "invoice factoring" is a great way for a business to get money. Accounts receivable financing is not a loan; it's an advance against client invoices.
The business sells outstanding invoices to a factoring company who then gives back up to 80% of the invoice value in the form of a loan against those invoices. Receivable Financing is mainly used to generate immediate cash flow for the business selling the accounts receivable.
These are a great funding option as they provide an immediate advance of cash to you leveraging your outstanding invoices, all for less then the cost of processing credit cards. This means as the business grows so does the amount of funding it will qualify for so it can meet increasing demand, and get money with rates as low as 2%.
Most major companies including most major Fortune 500 companies utilize some form of Accounts Receivable Financing.
One of the best benefits of receivable financing is it gives the business an increase in working capital without needing to borrow money or tie up your business or personal assets. This boost to cash flow positively impacts profitability.
The business can receive money quickly, typically within 24 hours from approval. This is much faster than trying to collect on the invoices and wait for that money.
Prior to purchasing invoices, a factor conducts a credit analysis on the client being invoiced to determine their risk or repaying the invoice. The business owner is entitled to the resulting analysis which is a huge benefit as it can assist in future business dealings with that client.
Another big benefit of Receivable Financing is that the business is not obtaining a loan. The cash advanced is based on the client's who owe on the invoice's credit status, not the business being lent the money, making it easier to qualify for.
Even new companies without an established track record, with tax liens, or even declared bankruptcy can still qualify for receivable financing.
This is not considered a loan since the business is literally selling your its receivables. Business can be approved for as much as 25 million dollars in financing.
Accounts Receivable Financing is one of a multitude of programs available to your clients through the Business Finance Suite.
TRW can help business owners obtain money and credit for your business by offering you the TRW Business Finance Suite.