There are many ways to get financing for your business. However, depending on your company’s credit history and other financial factors, you may not qualify for a traditional loan through a bank or financial institution. If that is the case, you may need to look elsewhere to secure financing for your company. One option that can be effective is accounts receivable financing.
Accounts Receivable Financing
Accounts receivable financing is a way to get financing for your organization based on assets. Through this method, you can access capital secured by unpaid invoices. The financing company advances you a percentage of the value of the outstanding invoices. When the customers pay the invoices, this can be used to repay the advance plus whatever fees are added based on the terms of the agreement with the accounts receivable company.
Applying for Accounts Receivable Financing
Many companies use accounts receivable financing because it is an easier application and approval process compared to traditional loans through a bank or other financial institution. Most often, the application approval is dependent on the invoices rather than the business’s financial qualifications. The invoices are used as collateral for the financing. Therefore, the company looks at the age, quality, and amount of outstanding invoices during the application process. This is beneficial for businesses that may not qualify for other financing due to insufficient credit scores. Most companies require that businesses have been in operation for at least six months, have at least $50,000 in business revenue, and have creditworthy customers, among other eligibility requirements.
Accounts receivable financing can be an effective financing solution for businesses with outstanding invoices. Since the company focuses on the invoices for the application process, there is less stress for organizations with lower credit scores or imperfect financial records. Through this process, you can use your unpaid invoices as collateral and get the additional capital you need to achieve business success.
Contact Navigate Firm today to learn more about accounts receivable financing.