Accounts receivable financing

Accounts Receivable Financing

Turn that IOU into working capital

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$ .00
Loan Amount Icon

Loan Amount

Up to 90% of Receivables

Loan Term Icon

Loan Term

Up to 1 Year

Loan Time Icon

Time to Funds

As Soon as 24 Hours

Loan Interest Icon

Rate

As Low as 3%

Unpaid invoices are a problem in all types of businesses. AR financing is the solution.

Use accounts receivable financing to get fast cash.

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Account Receivable Financing
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What is Accounts Receivable Financing?

Accounts receivable financing is a financing option that uses your company’s unpaid invoices as collateral for a lump sum of cash. Invoice financing typically comes with payment terms that give you 80% of the invoice value up front. Then, the factoring company takes over the process of collecting payment from your customers. Once the full amount is paid, you’ll receive the remaining invoice balance, minus a factoring fee that is paid to the company. 

The factoring fee is usually based on the net terms it takes for your customer to pay the invoice. It usually starts around 3% of the invoice total. However, you can also use other types of accounts receivables to get funding, including purchase orders and inventory. 

Because AR financing is based on tangible assets or debts owed to your company, you may find it easier to qualify than with traditional financing options like business loans. For instance, you’ll generally find more flexible requirements on things like credit and time in business. Even if your company started less than a year ago, you could still apply to qualify for accounts receivable financing. 

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How does Accounts Receivable Financing Work?

Accounts receivable financing is based on sales made by a company that have not yet been paid for by the customer. This includes things like unpaid purchase orders for products or unpaid invoices for services rendered. By financing these accounts receivables, businesses get faster access to capital and provides more predictable cash flow. 

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Advantages of Accounts Receivable Financing

Accounts receivable financing can be used for a number of reasons, including the primary benefits listed below.

Fast Access

Standard commercial banking products like term loans can take several months to process. But with receivable loans, you can increase your cash flow in as fast as 24 hours. You’ll quickly find out if you qualify and get early payment with invoice financing. 

Keep Your Equity

Some small business owners may be tempted to bring in external investors to help with cash flow issues caused by outstanding invoices. But that eats into your profit margins when it comes time to take distributions. Plus, giving away equity is permanent, while you can tap into accounts receivable factoring only when you need to.

Small Business-friendly

Invoice financing is beneficial to small businesses because you don’t need to have a strong commercial credit or personal credit score to qualify. Financing companies look at your customers, also called debtors, creditworthiness and ability to pay ontime. Lenders, on the other hand, look at many other factors when reviewing working capital loan applications.

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Requirements of Accounts Receivable Financing

Here’s what makes accounts receivable financing unique: your credit rating isn’t very relevant. Why not? Because the factoring company will be more focused on the credit of the company that owes you money, as it’s the crucial factor that determines how likely the factoring company is to get paid once ownership of the invoice has been transferred. This is of course different than how other small business loans work.

This underscores how important it is for you to work with legitimate, creditworthy folks. Play with fire and you might get burned. Reliable clients, on the other hand, will pay you faster and more consistently. And if you ever find yourself in a situation where you need to use accounts receivable financing (like right now), their financial health will provide you with better financing options.

You can apply for accounts receivable financing in a matter of minutes. Simply fill out our application, then compare options from 75+ leading lenders.

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Accounts Receivable Financing FAQ’s

What are the four common forms of receivable financing?

There are four types of AR financing: factoring, inventory financing, purchase order financing, and single invoice factoring.

Why is receivable financing important for small businesses?

This type of financing helps to keep cash flow in check so that your business operations and growth aren’t stunted due to outstanding invoices.

Is accounts receivable a debt?

Accounts receivable is a type of debt owed to a small business when a customer purchases a product or service but has not paid yet.

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I can’t describe the peace of mind this brings knowing I can meet payroll without needing to wait for my invoices to be paid. I am grateful for Lendio and Kabbage!

Jane S.

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