Small businesses face various challenges in their day-to-day operations. One of the biggest is maintaining a steady cash flow. Cash flow issues can stunt business growth and affect operations. If you’re a small business owner experiencing cash flow problems, accounts receivable financing may be the answer to keeping your business running smoothly.
What Is Accounts Receivable Financing?
Accounts receivable financing (AR financing), or invoice factoring, is a form of commercial financing that can allow you to obtain fast working capital instead of waiting several days to receive payment for your products or services.
Qualifying for AR Financing
The factors examined to determine who qualifies for AR financing usually vary from company to company. However, some key factors most companies look at include:
Time in business
Personal and business credit scores
Generally, most lenders won’t focus on the last factor. Instead, they’ll focus on the first two to determine whether the businesses owing you have a good history of settling their debts in good time.
In addition, to apply for financing, most lenders will require you to present the following documents:
Government-issued ID card
Two to three months of business bank statements
An accounts receivable report
However, the documents you’ll need to present may vary from lender to lender.
Benefits of AR Funding
Besides alleviating short-term cash flow problems, AR financing also offers the following benefits:
Traditional lenders such as banks often take a long period to approve loan applications. On the other hand, factoring companies can provide you with financing in 48 hours or less.
No Collateral Required
You won’t put your assets on the line. However, you’ll still need to provide a personal guarantee, making you liable for settling the advance.
Generous Funding Limits
Some lenders may provide you with funding of up to 80 percent or more of the outstanding receivables.
AR financing is an excellent financing option if you’re looking for short-term funding to resolve cash flow issues. Contact WCK Financial to learn if it’s a viable option for your business.