Common Accounts Receivable Financing Questions Answered

Common Accounts Receivable Financing Questions Answered

When looking for alternative financing options, accounts receivable financing should be on your list. There are many ways that this financing option can be helpful to your business. However, before using your receivables to secure the funds needed for your business, here are the questions you need answers to.

What Are the Benefits of Account Receivable Financing?

If your business experiences cash flow hiccups accounts receivable financing is a better option. This is because you get quick approvals and flexibility to use the funds for any business need. You also don’t need collateral to secure funds, and there is minimal paperwork to handle.

How Does Accounts Receivable Financing Work?

If you have financial issues at your business, you can apply with your invoices to get the funds needed. The lender funds your business depending on the total value of the invoices. You can get 80% of the total value to cover business expenses. The lender deals with your customers and ensures they pay the invoices in full. You get the remaining amount after the lender deducts their fees.

When Can You Use Accounts Receivable Financing?

You have the freedom to use this financing option for any business need. Factoring in your invoices can help handle cash flow needs. You can also use the funds to boost your working capital, purchase business equipment and manage wages. The flexibility of accounts receivable financing makes it practical for both small and established businesses.

Why Do You Need to Work With a Factoring Company?

It would help if you understood that not every lender has the capacity to collect payment from the factored invoices. However, you can get the right services by choosing a reputable factoring company. They have the financial capability and capacity to handle your slow-paying customers. You save valuable time and make your business productive.

Is Accounts Receivable Financing Short-Term or Long-Term?

You should know that accounts receivable financing is short-term. You can only use them to cover short financial gaps in your business. The lender dictates the financing period, which usually doesn’t extend past 90 days. You can, however, talk to the lender or factoring company to agree on the financing period to meet your expectations.

Finding the right alternative financing option is crucial for any business with financial struggles. The availability of accounts receivable financing becomes helpful after learning. At TCF Capital, we create a platform to answer all your questions. Call us today.