Small and medium businesses are the backbone of the American economy. Statistics put small businesses, businesses with less than 500 employees, at about 99.7% of all businesses in America. With such a huge number, small businesses seem to be thriving all across the country. But this is not always the case.
A huge number of SMBs crumble because of inadequate funding. Most of these companies expect an influx of revenue from goods sold or services rendered, but until they receive payment, they lack collateral to run their businesses. That’s where accounts receivables funding comes in.
Why Accounts Receivable Financing?
Accounts receivable financing is gaining traction among many businesses in America and the world for its many benefits. In essence, accounts receivable funding is arguably the best working capital funding strategy in the business community.
Accounts receivable financing also boosts a company’s credit rating and financial profile in its competing field. This post will highlight some of the benefits of accounts receivable funding, especially for small businesses.
What Accounts Receivable Funding Can Do for Small Businesses
1. Enhances Cash Flow
The importance of capital for running a business cannot be overstated. Some businesses, however, are unable to meet operational costs because of lack of capital, yet they have pending credit from sales. Accounts receivable financing, bridges this monetary time gap, so you get capital for business operations. Accounts receivables funding will monetize all your outstanding invoices and receivable, so you get working capital for your business.
2. Better Credit Rating
Credit ratings could either make or break a company. Account receivables funding can translate to business credit funding for all your loans and bonds so you can make timely or beforehand payments and improve your credit rating. Unlike venture capital, you don’t need to put crucial assets on the line to receive funding so you can retain equity as the owner of your business.
3. User Friendliness
No business is too small or too large to receive accounts receivable funding. Moreover, it will take you only a few days to set up an AR factoring line. Unlike small business loans, you don’t need to make regular payments or be in debt, for that matter.
This type of financing is also flexible, so you can choose any amount as long as it is within your receivables. You are also not limited to how many times you can get accounts receivable funding as long as the amount doesn’t exceed your sales.
4. You’ll Focus More on Your Business
Taking care of the money side of your business, accounts receivable funding will give you more leeway to focus on other crucial aspects of your enterprise. The time used in seeking out your clients for their pending payments could be diverted to more important matters like sales and marketing. In doing so, you could foster a more productive atmosphere for your business and substantially increase profits.
5. Additional Perks for Your Business
Your business could do with the additional services that usually accompany receivables funding. These services include portfolio management for your receivables account. Most financing companies will go out of their way to process your invoices and do some reporting and posting while they are at it.
Again, this will give you more time to focus on other revenue-generating aspects of your business for better profitability
The many benefits of accounts receivable funding are great for small businesses. The fact that funding is some form of borrowing should not deter you from the fact that it will help you run your business effectively.
With accounts receivable funding, you can get money for running costs, employee payments, exports funding, to name a few. You can also use the funding to pay off any pending debts and avoid a bad credit score.
Lots of financing companies offer solutions for invoice factoring across America, so you don’t need any special financial institution for accounts receivable financing. If your business is in the doldrums and you have outstanding sales payments, then seek help through AR funding from a financial institution today.