For small business owners, finding financing options can be incredibly challenging. However, accounts receivable financing may be able to offer the liquidity needed, without the drawbacks found with traditional financial tools. With that being said, business owners need to know a few things about the ins and outs involved in this process.
One of the first things to understand is which small businesses can benefit from this process. Generally speaking, B2C companies, or those that do not invoice their customers, should look for other options. B2B companies that do invoice their clients can use accounts receivable financing, though.
You also need to understand how the process works. It’s relatively simple. First, you need to apply for funding with an accounts receivable funding provider. You’ll sell your unpaid invoices to the company for an advance that’s usually slightly less than the invoice’s full value. This money is yours to do with as you like and there is no need to repay it. Once your client pays the invoice, the lender in question will deduct their fees and will then forward you the remainder of the invoice amount.
As you can see, accounts receivable financing is quite simple, and it can be very beneficial. It helps in situations where you need short-term cash flow, or if you cannot meet seasonal demands. There’s also the ability to capitalize on business opportunities that you would otherwise have to pass up, or make improvements in your business when you don’t have the liquid capital to do so. Finally, this sort of financing can allow you to hire seasonal staff, or take advantage of short-term or one-time discounts from your suppliers.
Interested in learning more about accounts receivable financing? Get in touch with Bear River Financial today to discuss your needs.