The 3 Big Benefits of AR Financing

The only problem bigger than needing money for your business is when you need it quickly. Visions of bank meetings, paperwork and those endless hours ticking by waiting for approval can be a nightmare. Fortunately, you can wake up from bad funding dreams by turning to a form of financing that is growing in popularity. Thanks to AR financing, you can convert your unpaid accounts receivable into quick cash by selling them to a factor company.

A factor agreement helps right out of the gate by not requiring any collateral from you, meaning there’s no risk of putting up assets like your business, car or home to back up financing. Factoring an invoice is a form of unsecured financing, which means the buyer of the invoice is choosing to take more of the financial risk. Usually, the factor company will charge you a factoring fee, but the factor will have to make back the bulk of its investment from the invoice itself.

With the factor company in charge of the invoice, it removes the task of collecting the unpaid money off your hands, freeing up more of your time. This allows you to instead put your resources and time toward your business operations. Use it to increase your sales, build your inventory, market your company, devise new strategies, anything that will be more productive to your business.

An almost instant benefit of AR financing is to free working capital and put it at your disposal. On paper, you may have plenty of capital, but if it’s in the form of unpaid invoices, it’s just dead weight until they are paid. Having some cash ready and waiting can give you greater peace of mind, especially if you find great deals to purchase more inventory and need the money to do it. You can use the money for any number of business operations. In addition to buying inventory or investing in marketing, you can buy more supplies for your office or perhaps take on a new hire.

Finally, it’s important to make sure your customer or client is fully aware of your factoring arrangement and will be comfortable with it. Some may look at using a factor company as a sign the company is in financial trouble. Be as open as possible to your customer that things are going well, and answer their questions.

AR financing can be just the thing you need to give your business a needed cash infusion. Carefully examine the terms of any factoring agreement and make sure your client approves of the arrangement, and you’ll soon have the added financial capital you need.