Receivables financing or “invoice factoring” is a great way to get money for your business.
Accounts receivable financing is not a loan; it’s an advance against your client invoices.
You are selling your outstanding invoices to a factoring company who then gives you back up to 95% of the invoice value in the form of a loan against those invoices.
Receivable Financing is mainly used to generate immediate cash flow for the business selling the accounts receivable.
These are a great funding option as they provide an immediate advance of cash to you leveraging your outstanding invoices.
This means as your business grows so does the amount of funding you will qualify for so you can meet increasing demand.
Most major companies including most major Fortune 500 companies utilize some form of Accounts Receivable Financing.
One of the best benefits of receivable financing is giving your business an increase in working capital without needing to borrow money or tie up your business or personal assets.
This boost to your cash flow positively impacts your profitability.
You can receive money quickly, typically within 24 hours from approval. This is much faster than if you were trying to collect on the invoices on your own and wait for that money.
Prior to purchasing your invoices, a factor conducts a credit analysis on the client you are invoicing to determine their risk or repaying the invoice.
You are entitled to the resulting analysis which is a huge benefit as it can assist you in your future business dealings with that client.
Another big benefit of Receivable Financing is that you are not obtaining a loan. The cash advanced is based on your client’s credit status, not yours making it easier to qualify for.
You may qualify for factoring even if you are a new company without an established track record, have a tax lien, or even declared bankruptcy.
This is not considered a loan since you are literally selling your own receivables. And you can be approved for as much as 25 million dollars in financing.
Accounts Receivable Financing really boosts your cash flow by providing an immediate advance of cash into your business against the value of your outstanding invoices.
SBA 7(a) Loans – Small Business 7(a) loans are well known and loved in the business community.
If you are awarded a 7(a) loan, the loan proceeds may be used to establish a new business or to assist in the acquisition, operation, or expansion of an existing business.
Directly from the SBA, here are some of the uses for loan proceeds:
• The purchase land or buildings, to cover new construction as well as expansion or conversion of existing facilities
• The purchase of equipment, machinery, furniture, fixtures, supplies, or materials
• Long-term working capital, including the payment of accounts payable and/or the purchase of inventory
• Short-term working capital needs, including seasonal financing, contract performance, construction financing and export production
• Financing against existing inventory and receivables
• The refinancing of existing business indebtedness that is not already structured with reasonable terms and conditions
• To purchase an existing business
SBA 7(a) loans are a great conventional way of obtaining business financing.