As a business owner, you have likely heard the term “accounts receivable financing.” However, do you really know what it is or what potential benefits it offers?
Often called factoring, this financing option has grown in popularity because of its efficiency and speed. If a lender has ever rejected you in the past, now may be a good time to consider accounts receivable financing. Some of the reasons to do this can be found below.
Removes the Burden of Tracking Down Payments
No one wants to have to spend time trying to track down people who owe them money. Not only is this tedious and frustrating, but it’s also a waste of time you could be spending doing other business-centric tasks.
With accounts receivable, a factoring company will handle all the dirty work for you. They are experts at collecting money and will do it much faster than you can.
Easier to Qualify
Some small business loans have high rejection rates. However, when you choose accounts receivable financing, the lender receives something that is valuable from you right away. Because of this, the risk is reduced, and it makes lenders much more willing to work with your business.
Your Credit Score Isn’t Scrutinized
When the factoring company you choose to work with decides if they should approve your request or not, they will focus on the overall financial health of the customers who owe you money. After all, this is how they are going to get paid. This isn’t a concern if your business’s credit score isn’t stellar since many factoring companies don’t even consider this.
Start Building Your Credit Score
If you have a healthy cash flow, you can better meet your financial obligations. This means that you will be able to make prompt payments to your landlords, partners, and suppliers. The result is a credit boost, which will help you garner even more affordable financing down the road.
You Don’t Have to Risk Any Collateral
Since the risk is lower with this, you don’t have to worry about putting up your personal belongings as a source of collateral. This is a big deal for most people since most small business financing may require you to provide this type of collateral, thereby increasing your personal liability.
If you are looking for alternative financing options for your business, consider accounts receivable financing. It offers you all the benefits here and more.