Whether you intend to expand your company or try to meet your company’s daily operational needs, cash flow limitations are one of the major challenges faced by small enterprises. These limitations can be stressful, discouraging, and can even lead to the closure of a business. Fortunately, this issue can be handled if you apply the appropriate strategy.

Moreover, cash flow issues are prevalent in trades where a gap exists between the delivery of services or goods and the payment receipt from a client. Clients can take 15 to 90 days to make the invoice payment after the delivery based on the business’s structure.

Business success can also create working capital and cash flow issues whereby sales generation is faster than the incoming business revenue. Account receivable financing is an invoice financing option that aims to meet the business’s operational needs until revenue catches up.

How Does Accounts Receivable Financing Work? 

When your client owes you money, the outstanding payment as a result of your business is referred to as an account receivable. This is the cash your company is owed for services or goods already delivered to clients. Account receivables help unlock various financing options, especially for small businesses, to maintain their smooth running.

Inventory and account receivable financing is an option where borrowers leverage assets to seek financing whereby the money your clients owe to your business can be used to make you eligible for cash advances or loans for your business. Unlike other financing methods, account receivable financing allows you not to sell the invoices to a third party. However, you remain accountable for making follow-ups and collecting the payment from the clients.

Although every financial institution is different, most account receivable lenders do not offer a full advance of your business’s unpaid invoices. A business receives advance offers of about 70% to 90% of the invoice’s value, and sometimes this offer may be less.

If your company is facing cash flow issues, seeking account receivable financing can help you overcome this challenge. For more information about account receivables financing, reach out to us at TCF Capital.