While being one of the oldest forms of financing used for commercial purposes, accounts receivables financing or AR financing or Factoring is gaining huge popularity now, and that too quite rapidly. One of the prime reasons for that is it provides an opportunity for companies to get a quick financial influx that helps them in growing their business without having to face any stagnation due to lack of funds.
Under this financing, a company usually sells some form of receivables such as outstanding invoices to a third-party financing company which is known as “the factor” in this equation. The factor evaluates the quality and age of the receivables and associated risks, based on which it provides cash to the company.
If you are a Logistics Company looking for AR financing in the United States, you can check out various financing options at the website https://intrepidfinance.io/ of Intrepid Finance and Ventures based in Indiana. Irrespective of the stage of growth at which your company stands right now, whether you are a start-up in the developmental stage or an established company trying to market out a new product; they can help you out in getting the right type of financing that best suits your needs.
Benefits of AR financing
1. Quicker funding:
• Monetizing the outstanding invoices gives you a chance to get immediate cash when you are in desperate need of it.
• This gives instant access to fund operations while your clients are weeks away from paying their outstanding bills.
• Access to working capital also increases your credit rating.
2. Gives you the peace of mind and time that can be utilized to focus on other aspects of your business:
• Now that you have money in hand, you can freely utilize it for other business activities including production and marketing which is eventually going to bring in more money.
3. Easier process:
• It is a much quicker process than waiting for weeks before your loan gets approved.
• Also, there is no debt creation as it is dependent on your sales growth.
4. Factoring companies can also provide additional services along with cash influx:
• Some factoring companies also provide add-on services as a managing account receivable portfolio and invoice processing.
• This is in turn gives you more time to focus on other productive activities.
5. No collateral required and ownership retention:
• Since you are in a way selling your receivables; you do not need to keep any other asset as collateral for obtaining the finances.
• You also get to retain your ownership and not share it with the financing company.
Although you can get some quick cash with accounts receivables, nothing in this world comes for free. The rate of interest you need to pay back is quite high and the contract terms for AR financing are usually long, so it will take a longer time to wind up the payments that you would want to.
Although all business enterprises need credit to keep their operations functional, you must weigh in the cons of AR financing against the benefits you might receive before trying to opt-in and make a deal with the factoring company.