Accounts receivable financing

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


LOAN AMOUNT

Up to $10M

TIME TO FUND

As Soon As 24 Hours

LOAN TERMS

Up to 1 Year

FACTORING FEE

As Low as 3%

What is accounts receivable financing?

Accounts Receivable Financing, also known as AR Financing, is a financial solution where a business sells its outstanding invoices or receivables to a finance company. This allows the business to receive immediate cash, eliminating the waiting period associated with client payments. In essence, AR financing turns your unpaid invoices into instant capital, enabling businesses to maintain a steady cash flow and invest in growth opportunities without being constrained by slow-paying customers.

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Accounts receivable loan vs accounts receivable factoring.

While both accounts receivable financing options, namely accounts receivable loan (AR loan) and accounts receivable factoring, aim to provide businesses with immediate cash to enhance liquidity, there are crucial differences between the two.

An accounts receivable loan (sometimes used interchangeably with accounts receivable financing) is essentially a credit agreement where your business’s unpaid invoices serve as collateral. You maintain control over your accounts receivable and are responsible for collecting payment from your clients. The loan must be paid back based on the agreed terms, regardless of whether your customers have paid their invoices.

On the other hand, accounts receivable factoring involves selling your unpaid invoices to a factoring company at a discount. The factoring company takes over the responsibility of collecting payments directly from your clients. In this case, there’s no debt to repay as the transaction is treated as a sale, not a loan. This is the most common type of accounts receivable financing.

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How does accounts receivable financing work?

Accounts receivable financing operates in a rather straightforward process. Here’s how it works:

  1. Invoice your Clients: Continue your business operations as usual by providing goods or services to your customers and issuing invoices accordingly.
  2. Receive Immediate Funding: The financing company then provides you with a cash advance, typically up to 90% of the invoice value, within 24 hours.
  3. Customer Payment: The invoice payment terms remain the same for your customers. In the case of an A/R loan, they pay you according to the agreed-upon payment schedule. Once your customer pays the invoice, you repay the financing company for the cash advance provided, along with any fees or interest. In the case of factoring, the factoring company takes over the responsibility of collecting payments directly from your customers. Once your customer pays the invoice, the factoring company will pay you the remaining balance of the invoice value, minus the factoring fees.
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How to apply for accounts receivable financing.

Sure, you can go the bank route with a long application process and 75% rejection rate. But if you’re looking for financing in this lifetime, Lendio offers a faster, easier application process.

STEP
1
Fill out the 15-minute online application.

It’s secured with bank-grade encryption and SSL technology, so you know your information is safe.

STEP
2
Receive matches.

We pair you with loan options from our network of 75+ lenders. Our dedicated funding managers can help you weigh the pros and cons of each option.

STEP
3
Get funded.

Once you’re approved, you’ll be able to access your capital in as little as 24 hours.

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Why use Lendio?

$12+ BILLION

funded through us

75+

lenders in our network

300,000+

loans funded

“The Lendio process was amazing”

Sterling Hannemann
Co-Owner of Seven Brothers

“Lendio literally saved my business.”

Chloria Chandler
Owner of Bobbee O’s BBQ

Accounts receivable financing FAQs.

Fast Access

With receivable loans, you can increase your cash flow as fast as 24 hours. You’ll quickly determine if you qualify and get early payment with invoice financing.  This immediate cash can cover operational expenses or invest in growth opportunities.

Don’t Wait to Get Paid

With Accounts Receivable Financing, you no longer need to wait for weeks or months to get paid by clients. This solution converts outstanding invoices into immediate cash, bypassing the hassle of delayed customer payments. It’s a proactive way to manage your cash flow and ensure smooth business operations.

No Credit Score Requirements

Accounts receivable financing stands out because it typically doesn’t require a credit check. Unlike traditional loans, the focus is on your customers’ creditworthiness. The financing company considers their payment history and reliability, as their payments cover the funding. This makes it an ideal solution for businesses with a strong customer base and consistent payment records, even if their credit scores aren’t perfect.

To qualify for accounts receivable financing, the following are the standard requirements:

  • Your business should be B2B or B2G
  • Minimum monthly revenue of $10,000
  • Operate in the funder’s preferred industry

There are four types of AR financing available:

  1. AR loan: An advance secured by your accounts receivable.
  2. Invoice factoring: The sale of all or a portion of your outstanding invoices to a third party.
  3. Inventory financing: Uses inventory as collateral for a loan, helping businesses buy raw materials and prepare for large orders.
  4. PO financing: Provides funding to cover the cost of delivering goods by paying suppliers.

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.

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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