Cash flow troubles are commonplace for businesses of all sizes. However, you may not always anticipate where these problems will originate. When your clients are not making timely payments for services your company has completed, it can have a serious impact on your access to working capital. Instead of waiting for payments, you can take direct action with accounts receivable financing services. Look over these details and learn more about how factoring services work and how your company will benefit from them in the long run.
Reviewing How AR Financing Services Work
Having access to valuable assets is key to using financing services to your advantage. With accounts receivable financing, unpaid invoices act as collateral to secure an advance. A lender will assess your invoices to determine if any are eligible, then purchase qualifying receivables from you. The lender provides a portion of the total value immediately, takes a fee for the service, and pays you the difference you’re owed when the full amount has been collected from your client. This fast and flexible service can be a practical fit when you’re struggling to access working capital.
Learning About the Benefits of Factoring Solutions
One of the biggest benefits you can expect from factoring solutions is that the service is not a loan. This means that you will not be expected to pay back the money you are being advanced. Since you’re already owed the funds being provided to you, the lender only expects you to pay a service fee. Additionally, the solution is helpful when delayed payments on invoices have led to cash flow disruptions. Since you require capital to handle a variety of expenses related to running your business, using AR financing can prevent you from falling behind.
Understanding the Drawbacks of AR Financing
Before you find a lender that offers accounts receivable financing solutions, there are several points to consider. For one, not all invoices will qualify for the service. Lenders tend to prefer invoices connected to clients who are most likely to pay back the owed money. Review the lender’s criteria before making any assumptions. Additionally, you need to pay attention to the fee that the lender charges. In some cases, the fee might be significant enough that waiting for your client to pay you directly could be the more sensible financial choice.
When your business is dealing with clients who are not making prompt payments on completed services, you need to take action. Learn more about factoring services and see if this solution is a sensible fit for your company’s financial needs.