Business & Services

Financing Accounts receivable – How to use other people’s money to finance your growth

Many people grow read Superman’s comics for fun. Ask yourself, whether it’s extraordinary (think of this as a metaphor) if your B2B business is “faster than a driving bullet, stronger than the locomotive and is able to jump over tall buildings in one bond?” Does your business benefit if you can always have cash from your invoice when you need it? Does your business benefit if cash is available for almost unlimited growth? Does your business benefit if you can “jump over” your cash flow problem to provide more products or services to your customers?
In general, the greater your customers, the slower they pay your invoice. It’s like a old joke, the question: “Where is a gorilla sitting?” Answer: “Anywhere is desired.” For example, a small sound engineering company is engaged to have a sound effect on the main film production studio. When asked to comment on their experience working with prestigious clients, the owner said: “Afraid of the ears”.

It’s just a universal trend that your biggest customer might be no later than paying you. Do you have to wait 60 to 90 days to be paid by your best commercial or government customers? If so, accounts receivable financing can be the answer to your cash flow problems.

There are several advantages of financing accounts with ordinary bank financing. Your current credit score, or your company’s credit, is not a problem because the financing entity depends on the feasibility of your customers’ credit. In fact, several companies in the “Special Asset” division of the bank (which is euphemism because they are asked to leave the bank “is the main candidate for financing accounts Can obtain financing of trade receivables with express permissions from the bankruptcy court.

Financing receivables will grow in terms of your credit limit when your company grows. So if you are with the right commercial finance company, your growth has the potential to be unlimited. Compare this with ordinary bank financing that see your current situation and the operation history of your last two years.

Many entrepreneurs are optimistic, energetic and very positive in their predictions about their future. Bank analysts were trained to see the worst case scenario. Each bank must undergo a periodic “safety and health examination”. Part of this process is a federal regulator team that guesses every loan decision where the bank has provided credit.

There is a lot of truth for the old saying that banks will only lend money to people who don’t need it. The bank does not want to suffer penalties that can be worn by federal regulators if they find “bad” loans. So the standards and perspectives of banks and commercial financial companies are very different.

Financing accounts receivable can give you the cash you need in one or two days of your customer’s invoice. Some commercial financial companies have a very sophisticated internet-based submission system. You send an electronic invoice; It is reviewed and verified; And the agreed advance increase is connected to you on the same day. Other companies use a paper fax-based system but the results are very similar.

The terminology of accounts receivable can be confusing. The following words are basically the same meaning: Financing Receivables, Factoring Receivables, Factoring Receivables, Factor Invoices, Factoring Discounts, Asset Based Loans (usually related to enormous transactions).
In essence: If your customers pay you are too slow, and this limits the growth potential of your business or profit, you must consider accountsing financing.

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