Account Receivable Financing
Account receivable financing (or A R Financing)is the process wherein a business can sell their unpaid invoices at a discount in return for immediate cash flow and is often used in lieu of bank loans. Rather than wait on your customers to pay their invoices, you can pay a factoring company a percentage based fee and make sure that your accounts are funded. This can be especially beneficial to businesses who are unable to get bank loans because of their credit standing. Factoring companies consider your customers’ credit worthiness over yours because that is where their payment will be coming from.
Account Receivable Financing Process
The account receivable financing process is simple. Based on a variety of factors like your eligibility, your customers’ track records, and the amount of invoices, you will receive a specific rate from the factoring company. Once you factor your invoices, most factoring firms will pay you within days. Your customers will have to pay within 90 days, otherwise the debt reverts to you and you must pay back the factoring company. Though the economy has changed, this is a simple and straightforward business that still functions a lot like it did when it first began in the early days of banking.
The financing you receive from factoring invoices can be used towards funding your payroll, buying new equipment, and anything else. You can factor as many invoices as you want and can continue to factor invoices for as long as you wish. Your customers will be quickly notified that their debt is now owed to a factoring company and your accounts will be funded so that you can continue operating your business.
Another tactic that is similar to factoring is invoice discounting wherein a business can take out a loan using their invoices as collateral and pay a set interest rate rather than a percentage of the invoices. The benefit of discounting is that you are able to receive all of your invoices in full afterwards.
Account Receivable Financing Video
This video describes the difference between borrowing and factoring, or also known as account receivable financing.
Thought about borrowing money against your accounts receivable lately? Banks have never been tighter with their money than they are now. That doesn’t mean nobody can borrow from a bank, but if your company’s not making money right now, you can bet they’re not going to make it easy for your financing needs.
Factoring companies don’t care if you’re making money or not. They also don’t care what your balance sheet looks like. Companies like Interstate Capital make applying a breeze and approval comes in minutes, not weeks.
Financing your Account Receivables can happen in a few days, not a few months. In fact, most companies can receive an instant on-line rate proposal right from our web site at InterstateCapital.com.
From there, you can apply on-line and get an instant approval within an hour. In addition to providing far greater availability against your accounts receivable, Interstate Capital also acts as your credit department, assisting you to establish prudent credit limits for your customers.
We provide 24-7 online access for credit inquiries and instant approval on tens of thousands of companies. In addition to providing account receivable financing, credit and funding services, Interstate Capital provides another feature that banks don’t offer—a department that handles collections.
We make follow-up phone calls to obtain payment status. In addition, we send automated statements to your customers to assist them in paying you more quickly.
In short, Interstate Capital advances more money, help you to reduce credit losses, and saves you time and money by collecting your payments for you. At Interstate Capital, there are no loan committees or regulators making our decisions for us. You are assigned a personal account manager to take care of your every need.
You have 24-7 online access to all your invoicing information and reports, including digital images of your invoices and supporting documentation. Try Interstate Capital for a no-risk 90-day trial. We’re so confident you’ll find our account receivable financing service to be so user-friendly, you may never borrow money from a bank again.