Situations In Which An Account Receivable Financing Company Can Help You

Businesses need cash flow to operate, but sometimes the cash flow isn’t there – it’s stuck in the unpaid invoices your clients haven’t paid yet. In other words, you have the business, but the money isn’t in your possession quite yet. Without proper cash flow, you may find yourself at risk of closing your doors sooner than you thought.  

An accounts receivable finance company helps minimize this risk. AR financing is a loan on your outstanding invoices. The invoices serve as the collateral for the loan. You can then use the funds to cover your business’s operating expenses, including payroll, rent, inventory, and equipment financing. In other words, AR financing helps you make ends meet whether you are a new or existing business.  

Just what situations can an accounts receivable financing company help? Check out the top ways below. 

Covering the Gap Between Invoices and Expenses

If you have bills due that you can’t quite pay because you have unpaid invoices, accounts receivable financing can help. Most AR financing companies allow you to borrow between 80 – 90 percent of the amount of your outstanding invoices. You can use the funds to cover your bills that keep your business operating. Once the invoices are paid, you pay off your loan plus any applicable fees. 

This is a great tactic for new or established businesses. New businesses often need support to keep taking on new clients and growing their business. Established businesses sometimes see a lull or take on more business than their cash flow can handle, but AR financing helps cover that gap for the short-term so that you can keep operating. 

Spontaneous Purchase of Equipment or Products 

If you come across a great deal on the equipment your business needs or could benefit from or there’s a liquidation sale on materials you use for your products, you should take advantage. If you don’t have the cash flow, though, it may seem impossible. An accounts receivable finance company can help. Upon approval, you’ll receive funds within a day or two, allowing you to take advantage of the great deal in front of you rather than awaiting the 30 – 45 days invoices take to get paid (if they’re paid on time) causing you to miss out on the deal. 

 Helping to Cover Payroll

Payroll is often a business’s largest expense. If you have outstanding invoices that aren’t getting paid, it may be hard to cover payroll. This puts you in quite the situation. Not only could you face legal issues, but you may ruin the employee morale in your company. Why would employees want to work hard or even come to work if you aren’t covering payroll? Accounts receivable financing helps you manage your cash flow so that you can meet payroll. This helps increase productivity and possibly reduce employee turnover, which helps minimize your costs. 

 Help in Slow Seasons 

If your business is seasonal or experiences peaks and valleys (most businesses do), your cash flow may be too low during the valleys. Using an accounts receivable finance company helps ease the burden during those slower times, allowing you to have access to cash earned even though it’s outstanding.  

Covering for Large Clients 

If your business has several large clients, you may have large outstanding invoices. While you provide your product or service to them, they have 15 to 90 days to pay the invoice, depending on your billing cycle. Since you provide the product or service upfront, that leaves you without a large amount of your cash flow. You incur the expenses yet you may not receive payment for as long as three months. Accounts receivable financing gives you access to the cash you’ve earned but that isn’t paid yet. This allows you to keep marketing and taking on new clients while paying your employees and your other operating expenses. 

Provide the Chance to Take on New Jobs 

Why take a chance of losing a new job? If you’re waiting for invoices to get paid, yet you get the opportunity to take on a new, large client, AR financing can help. Cash flow is important to help you provide the product or service for any client, but if you get a big job that promises to send your business soaring, your need for cash flow increases. Liquidating your invoices now can help you grow your business without the risk of falling late on your own bills or payroll expenses. 

If you have opportunities or you just can’t make ends meet because you’re a new business or the economy slowed down, tap into the help of an accounts receivable finance company. It provides a way to access your earned funds before your clients pay you. It’s a cash flow solution that provides you with free working capital that is available to new and existing businesses.