The Benefits of Accounts Receivable Financing

Do you rely on payments made 30 days or more after products and services are delivered? This business model, while necessary for some industries, can put a lot of strain on companies that need capital for growth. To make things more difficult, it can be almost impossible to get a loan when you don’t have great cash flow. If your company is in this position, accounts receivable financing may offer several benefits.

1. No Credit Checks on You or Your Company

Rather than looking at your credit history, financial institutions that offer this type of financing are more interested in your customer base. These organizations don’t lend funds outright; instead, they buy customer debt from you.

2. Increased Cash Flow

One of the best things about accounts receivable financing is that you get cash immediately and apply it where it’s needed most. This may mean less stress, since you have more resources for day-to-day expenses, not to mention emergencies.

3. No Debt

Since you’re not taking out a loan, there’s no debt to worry about. You get working capital without the ball and chain of monthly payments and interest. You also don’t have to be concerned about putting anything up for collateral.

4. Simple Approval Process

The application process is much quicker and easier than with a traditional loan. This means faster cash for you and less paperwork. Lenders may run a credit check on your customers to determine the risk they’re taking on, but you don’t have to worry that being a startup or having a bankruptcy in your history will sink your chances of being approved.

5. Positive Effects on Your Credit Score

Better cash flow can help your credit score, as you’ll be able to report more profit and pay debts on time. With careful planning, you may even be able to get approved for other loans in the future.

6. Retain Business Ownership

Some types of financing require that the lender own a percentage of your business. This usually means you no longer call the shots, as you have to please investors. Accounts receivable financing lets you keep control of your company while accessing the capital you need.

7. Turn Risks Into Assets

Accounts receivable are always a risk because you can’t know if customers will pay on time or at all. When you decide to finance them, you’re literally taking that risk and turning it into an asset. Instead of worrying about whether you’ll be providing products and services for free, you can “collect” on every order made.


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