3 Advantages of Using Accounts Receivable Financing

3 Advantages of Using Accounts Receivable Financing

Accessing working capital right when you need it is often the trickiest part of managing a small business. The key is to prepare so you know where you will go for money in the event of each need you see on your horizon. That means planning for cash flow management with short-term financing options or a credit line, setting up financing plans for equipment acquisition, and even setting aside resources for windfall opportunities like sudden large orders from new customers. For many businesses, accounts receivable financing is the right choice because of the unique advantages it offers companies that are sitting on a pile of invoices.

1. AR Financing Does Not Appear on Your Credit Report

Bank loans and credit lines show up on a credit report because they add debt to your business. Since financing your invoices means getting an advance on money owed to you, it does not show up as debt in the way those other instruments do. In many cases, it does not even involve recourse for the lender to hold you accountable if customers default, although you will need to check specific program details to confirm that because some lenders offer lower costs for recourse clauses. If you are confident your customers will pay, it could be worth taking that risk.

2. Approvals Happen in Just a Couple Days

Accounts receivable financing requires just a quick review of your invoices and payment records to confirm that your customers do have a solid history of paying on time. There are other points to negotiate, but you usually hear about a pre-approval within 24 to 48 hours, with full deals negotiated after just a couple more days and money in your account in about a week. That’s the average speed when working with a new lender, but if your financing company knows you as a regular, it could go a lot faster.

3. You Can Finance Whenever You Have Invoices

If you need capital and you have invoices unpaid on your books, you can send them out for financing. It’s that simple. Even if you are waiting for payments on invoices you have already financed, most providers are happy to draw up a new agreement based on the invoices that have come in since then. This is especially true of lenders who know your company and have a history of receiving prompt payments from your customers. That makes it worth your while to build a relationship with an accounts receivable financing firm as your business grows.

Here at Brightview Commercial Capital, we offer a variety of commercial finance solutions to all types of businesses—including startups and established businesses. We invite you to consult with us to see if any of our business loans can meet your company’s needs.