Businesses have to take and give credit time and again for varied needs. Having too many accounts receivables may seem like a good thing on paper, but often, this can lead to serious crunch in working capital and cash flow. In such circumstances, a company may consider what is known as accounts receivable financing, where the lender agrees to lend an amount based on unpaid bills and invoices. These accounts receivables are considered an asset for the concerned business and are usually less than 90 days old. Lenders like Accord Financial invoice factoring have helped thousands of businesses in staying afloat. In this post, we are sharing more on accounts receivable financing and other aspects worth knowing.
Discover the pros and cons
When your company is dealing with a financial crunch with regards to working capital, accounts receivable financing is one of the most flexible and scalable lending options. Eventually, you are using your own company assets to get money earlier than expected. The only downside is the cost of lending, which again is worth considering when you need cash to run the business and keep the operations seamless.
Interest rates and more
With accounts receivable financing, you obviously have to give away an amount to the lender, and the rates vary. Advance rate, risk involved, and the performance of your company in general, will be considered by the lender before deciding on the lending rate. If your business is considering this option, it is important that you consider the amount/rates involved, which can be higher than some of the common types of business loans. If you do not repay the amount, you will have to pay more eventually. While agreements in accounts receivable financing is typically short and easy to manage, terms & conditions may vary greatly.
Things to note
It is important to know that accounts receivable financing is also often called factoring, and the lenders are known as factoring services or companies. Some factoring companies can also help with credit guarantees, and manage accounts receivables on behalf of your company. There is also something called recourse factoring, where the borrowing company has to buy back the receivables that cannot be recovered. In case of non-resource factoring, the lender takes the risk of bills and accounts receivables, assuming that the invoices will be eventually paid.
Check online now to find more on accounts receivable financing and compare your options wisely after considering all terms & conditions.