Account Recivable FinancingGrowing and expanding a business can be seen an expensive task. Companies are unable to increase their annual profits because of their inability to reach more customers. Limited and/or exhausted credit may prevent a business from obtaining a loan. Fortunately there are other options to obtain capital for a business. Accounts receivable financing or factoring is a great way for business to secure financing without the need of a small business loan. A business owner will be able to grow their company without worrying about a loan rejection.
Accounts receivable financing factoring does not have a sole purpose for expanding. Everyday businesses are choosing factoring in order to help stabilize their company. Companies that are not able to meet certain expenses can benefit from factoring. Payroll, supplies, and or equipment expenses can all be taken care of through factoring.
How does factoring work? A business or company agrees to a type of asset-financing arrangement between another company or entity. The financing agreement uses the company's receivables as collateral. The receivables are usually money owed by customers. The amount financed will depend on the value of the receivables. The older the receivables the less the business can expect to receive.
Though business may not get the exact value amount for the receivables, factoring is a great way to free up capital that has been stagnant in certain receivable accounts or to acquire money to pay expenses or expand.