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How to Turn Your Accounts Receivable Into Fast Funding?

fast fundingReceivables financing is the silent supporter behind the growth of many small businesses today. As the economy continues to perform sluggishly nationwide, entrepreneurs and managers have to find ways to finance new growth opportunities. Increasingly, savvy profit-minded professionals are realizing they have a ready source of collateral conveniently housed in their existing business structure. This collateral is in the form of the business’ accounts receivable. You might not yet be familiar with how you can turn your company’s accounts receivable into fast funding to stabilize and grow your small business. Learning the basics of how this innovative and popular newer funding tool works can aid your business tremendously.

Receivables Financing Explained

Receivables financing is often also called “accounts receivable financing,” “receivables funding” or “factoring.” These terms are used interchangeably but they all refer to the same funding type. Financing receivables works by allowing a company to use its own accounts receivables as collateral to receive fast funding in the form of a funds advance (more common) or a line of credit. Interest rates can vary depending on the funding partner you select. Typically, the funding partner withholds a percentage of the total funding granted as a reserve.

Choosing a Funding Partner

There are many funding companies offering the option of leveraging the value of your accounts receivable to obtain fast working capital or lines of credit. Initially, you can do much of the required research to choose a funding partner online. However, there are a number of things to look for that can improve your experience with your chosen funding partner. In particular, verifying each item on this list will direct you toa funding partner that is serious and professional about helping you grow your business:

  • The process to apply is simple, fast and fully explained.
  • Customer support is always available by phone as well as email, chat and/or online.
  • Customer testimonials are positive.
  • Funding is granted to businesses in a variety of industries.
  • It is easy to generate an online initial quote to see what your receivables are worth.
  • Decisions are based solely on existing accounts receivables (not on tax returns, financials, debt to equity ratios or other factors).
  • Funding decisions can be expedited where applicable and requested.
  • Decisions are made in 24 hours and funding arrives in three to five business days.

Applying for Receivables Financing Approval

One of the most appealing facets of using receivables financing for your funding needs is that it is simple and fast. Unlike applying for traditional funding sources like bank loans, there is no lengthy application, no endless waiting with follow-up calls and no long line of other business owners applying for the same limited pool. Since receivables funding is assessed and generated based solely on the value of your particular company’s accounts receivables, the application process is quick and the approval process is quicker. While the basic steps to apply for receivables financing may vary depending on the funding partner you select, these steps encompass the basics:

  • Gather together information that details the total value of your accounts receivable.
  • Contact the funding partner you have selected via phone, online form or email.
  • Provide company and contact information as outlined on the application.
  • Answer any questions the funding partner may have.
  • Receive approval and accept your funding.

Finding the Best Funding Fit

Certain companies are a better fit for accounts receivable-based funding than other companies. Companies in industries such as agriculture, distribution, import-export, manufacturing, distribution, wholesale goods, medical service providers, government and civil contracts, oil and gas companies, freight or trucking companies are typically a good fit for accounts receivable funding. If you are not sure whether your company or your industry fits well with this funding source, a quick call to the funding partner you want to work with will help you decide.

The next time you receive a short-term opportunity to quickly grow your business, choose accounts receivables funding to give you the start-up cash to make your dreams reality. Many companies today have benefited from this funding option and you can as well.

About the Author

Raul Esqueda is founder and CEO of 1st Commercial Credit LLC (www.1stcommercialcredit.com) in Austin, Texas. Raul has experience funding businesses of all industries and sizes in the United States, United Kingdom and Canada and has written many articles about purchase-order finance, factoring and asset-based lending.



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