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From time to time, companies may need a revenue source to get through a rough spot, or to
finance a project that is expected to yield large dividends. When these type of situations arise,
there is the option of accounts receivable financing as a way to continue operations while
resolving the issues that created the temporary crunch.
There are two distinct alternatives when it comes to accounts receivable financing. Lenders may
use the average monthly accounts receivable revenue as the basis for extending a loan. The amount
of the loan will take into amount the average aging of the account debtors, consistency of the
monthly billed revenue generated by customer accounts, and the usual amount of payments received
per month.
Along with the total amount of the loan, these factors will also be used to determine the
amount of the monthly payments on the loan. With this alternative, the company retains all control
of its receivables and is responsible for handling collections, posting payments, and all the
usual accounting functions. Generally, this is a workable alternative for a corporation that is
in a short-term money crunch for some reason, and needs read more: What is accounts receivable
financing?
What is Accounts Receivable Financing?
Receivable financing is a method used by businesses to convert sales on credit terms for
immediate cash flow. Financing accounts receivable has become the preferred financial tool
in obtaining flexible working capital for businesses of all sizes. The receivable credit
line is determined by the financial strength of the customer (Buyer), not the client
(The seller of the receivables).
Accounts Receivable Financing is available in days, not weeks.
At 1st Commercial Credit, we make receivable financing easy to obtain with minimal paperwork.
Our decisions are not based on financials, tax returns or even equity to debt ratios.
We make decisions primarily on the invoicing process and the credit strength of the account
debtor (buyer). We specialize in evaluating and financing accounts receivable and can make
a prompt decision within a day.
This financial solution involves very little underwriting. The approval process is simple
and we can expedite initial funding in 3 to 5 working days. Our clients can enjoy the benefits
of our prompt service and begin to use their funds within days of completing an application.
Use invoice factoring services to make more money for your business.
Making the most of invoice factoring services means you will have plenty of money to expand
your business, purchase extra inventory, take on those customers you couldn’t afford to before,
hire more employees and anything else you might want to do to make your business grow. You can
do this by simply applying to a factoring business.Most factoring companies are willing to
buy your factoring invoices, but how do you know ... Read more
For companies that are attempting to regroup after some sort of major crisis, such as
using up resources to fight off a takeover attempt, the concept of factoring as a means of
accounts receivable financing is a common practice. Lenders who specialize in this form of
accounts receivable financing usually charge a flat fee per billing period, plus a fixed
percentage of the total billed revenue for the period. In exchange, they factor the total
billed revenue, less their percentage, and advance that amount to the company.
With this sort of arrangement, the lender assumes control of receiving all payments on
the invoices issued by the company, takes over the collection process, and supplies the
company with periodic reports on payments received. This allows the company to still post
payments in their billing system, so there is an accurate record of what is paid and what
is outstanding. read more: What is accounts receivable financing?
Typically, the account debtor cannot be released from an accounts receivable financing
arrangement until the terms are completely settled. While the loan form of accounts receivable
financing has an obvious end point when the loan is paid off, the factoring type of accounts
receivable financing may be more difficult to arrange. Working with the factoring lender to
determine when the last batch of invoices will be factored and making arrangements to pay off
any outstanding invoices that were factored will keep the process ordered, so customers are
not confused about where to remit payments. read more: What is accounts receivable financing?