Accounts Receivable Loan

When you need working capital for regular expenses or new funds to expand your business, you have options. One option is pursuing a traditional bank loan. However, sometimes your situation calls for an alternate source of funds. Factoring is an alternative funding method that may work very well for your needs.

A factoring company advances you the value of the invoices sitting in your accounts receivable, thereby improving your cash flow. You turn your outstanding invoices into cash right away so that you can pay bills and grow your business without waiting 30 to 90 days for customers to pay you.

Here are a few reasons to consider factoring:

Timing

It makes sense to choose a factoring company instead of a bank if you need working capital quickly. Bank loans usually require lengthy approval processes and if you need cash right away to make payroll, pay suppliers, and cover other financial obligations, then it’s a good idea to choose factoring.

Qualifying for Credit

Another scenario where it makes sense to opt for a factoring company instead of a bank is if you may not qualify for a bank loan. Getting approved for bank loans is becoming increasingly difficult for both new and established businesses. Your business growth can be stopped if your credit score, financial history, and lack of collateral don’t meet banks’ rigorous lending restrictions. On the other hand, factoring companies accept new clients based not on an applicant’s financial background, but at applicant’s customers’ credit ratings and payment histories.

Flexibility

With bank loans, you are locked in to agreed-upon rates and terms and you commit to repay that loan with interest out of your unknown future income. A business slowdown or other variables could significantly reduce your income, but your loan obligation doesn’t change. However, since factoring is simply an advance on work that you have completed, there’s nothing to repay. Factoring gives you the flexibility you need to grow at a steady pace, without incurring additional lines of debt.

Services

One of the benefits of opting for factoring services instead of a bank loan is that a factoring company will offer you services that a bank doesn’t provide. Factoring companies can give you the collection expertise, accounts expertise, credit checking resources and administrative support that can help your business flourish. Many factoring companies also offer high quality online record-keeping and tracking solutions that will enable you to run your company more efficiently.

Here is a simple example of how factoring works.

When a bank loan isn’t feasible for your needs, factoring works very well for both small and large businesses. Interstate Capital has many success stories of how we helped companies get access to the working capital they need to keep up with expenses and grow their businesses. Contact Interstate Capital for an instant factoring rate quote today.