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If your business is in need of financing to get ahead and you might not qualify for a traditional loan or you’re not interested in taking the time to wait for a conventional loan, consider using accounts receivable funding to secure the money you need.

How Does Accounts Receivable Financing Work?

If you’re in need of quick capital to get out of debt or revitalize your business, using your accounts receivable might be the way to go. First, collect all of the unpaid invoices that you’re expecting to receive from your clients or customers. These unpaid invoices are what you’ll be using as collateral to receive the funding from a factoring company.

Benefits of This Type of Funding

There are several worthwhile benefits that come with accounts receivable funding. First, you’ll usually receive up to 90 percent of the value of the invoices that you offer. For many companies, this is a significant amount that will help your company get back on its feet after a rough period of time, or it will help you get ahead if the business is already doing well. Another big benefit that’s appealing to companies seeking accounts receivable funding is that when you use outstanding invoices as collateral for the cash advance, your business will no longer be held accountable if the customers default on their payments. This can gives companies peace of mind, since they’ll still receive funding without having to chase down customers to make their payments on time.

Reasons to Pursue Accounts Receivable Loans

If you think your business might benefit from your accounts receivable invoices, it’s important to take a few considerations into account before pursuing this type of financing. If you’d like to receive cash instantly without having to wait for a few months, accounts receivable financing is likely a great option for your business. With a conventional business loan, it often takes several months to gather the necessary documents and to receive the loan. To secure quick funding with little to no risk, accounts receivable funding is a good option for businessowners. It’s up to you whether or not you would prefer a cash advance up front or you’d like to wait a bit longer for a potentially bigger business loan.

Consider the Size of Your Business

When it comes to securing this type of funding, it’s important to think about the size of your business. In general, smaller companies usually tend to forgo using their accounts receivable invoices as collateral simply because they don’t have enough invoices to make the financing worthwhile. However, if you’re a large corporation that’s in need of quick money, this is usually an option worth considering. In addition to the size of the company, also look through the invoices and prioritize them from newest to oldest. The factoring company will give you the most money for new invoices, as customers are more likely to follow up on fresh invoices. The company you receive the financing from won’t want to give you as much for older invoices, as they’re more difficult to content with. If you’re interested in using accounts receivable as collateral for a cash advance, be sure to take time collecting the newest invoices to receive the highest value.