Factoring and accounts receivable financing.

A/R’s and P/O’s

Accounts receivable financing, sometimes known as factoring, enables a company to better meet the daily operational demands of running a business. This financing program advances the business money on their outstanding invoices, allowing the company to have consistent cash flow. Inadequate cash flow is the number one reason why businesses fail.

When to Use Accounts Receivable Financing / Factoring? Examples of when to use AR Factoring financing are described below:

  1.     Companies in a high growth cycle needing consistent operating capital (cash flow) to fuel their growth
  2.     Companies in survival mode needing consistent cash flow in order to fulfill their liabilities
  3.     Staffing agencies with high weekly payrolls requiring immediate cash on hand
  4.     Manufacturers and Business to Business service- oriented companies with high material and supply costs
  5.     Companies looking for alternative debt-free financing solutions to build their credit and enhance their business
  6.     Companies already leveraged by existing debt
  7.     Companies denied bank loans for any various reasons, such as poor credit or few existing assets
  8.     Start-up companies showing only one or two Accounts Receivable cycles
  9.     Companies that need consistent cash flow in general and/or want additional collection assistance
  10.     Companies that need a flexible finance plan allowing them to obtain financing on an as needed basis
  11.     Companies looking to tap into their own money instead of creating new debt for their business

Why use Accounts Receivable Financing / Factoring:
There are many benefits to factoring. A primary advantage is flexibility. With a bank loan, you are simply adding to your monthly liabilities, causing more of a cash flow crunch. With factoring, you are tapping into money that is already owed to you. You can get advances on all or just some of your invoices. You can even skip getting an advance on your invoices if needed. In addition, since you are not paying the bill, factoring financiers care more about your customer’s credit rating than your own, yet your credit as a company improves as you now have the cash flow to easily cover your own liabilities.Below are other reasons why an Accounts Receivable Financing / Factoring program is a good tool to finance your business:

Increase operating capital (cash flow)                   Grow your business
Increase sales                                                       Save your business
Increase profits                                                      Get payments quickly
Improve credit rating                                              Cover payroll
Pay bills promptly                                                   Obtain discounts
Buy inventory                                                         Cover operating costs
Purchase supplies and equipment                          Asset Protection
Secure both new clients and/or larger clients, and more…

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