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Up to 90% of Receivables
Up to 1 Year
As Soon as 24 Hours
As Low as 3%
Use accounts receivable financing to get fast cash.
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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.
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.
Accounts receivable financing can be used for a number of reasons, including the primary benefits listed below.
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.
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.
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.
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.
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.
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!
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California loans made pursuant to the California Financing Law, Division 9 (commencing with Section 22000) of the Finance Code. All such loans made through Lendio Partners, LLC, a wholly-owned subsidiary of Lendio, Inc. and a licensed finance lender/broker, California Financing Law License No. 60DBO-44694.