How Businesses Leverage AR Financing For Working Capital

As a business owner, it’s normal for you to be saddled with many responsibilities. You have to know what your customers want and how to supply what they need. In the meantime, you’re tasked with ordering parts or training the new person, all while dealing with a potential safety issue and trying to finish your tax return. Frequently, it’s a “when it rains, it pours” situation when it comes to owning your own company. What you don’t need is another emergency or unpaid invoice. Life happens, though, and unpaid collectibles can make or break your business no matter how long you’ve been at it. Some entrepreneurs have turned to AR Financing to get them past the rough spots.

Owning a business takes planning, guts and money. You can do all the planning in the world and you certainly have the guts, but what happens when the money doesn’t come in on time? It’s hard to control finances. What if you need to expand or restructure? If you have slow-paying customers, a downturn in the economy or any other factor that affects your business income, there is a way to get some working capital so your business stays afloat. AR Financing is one method used by business owners to leverage extra capital. Sometimes known as invoice financing, this is a fast solution for funding when you can’t get it from traditional loan processes.

Specialized financing companies will work with B2B clients, giving them net-30 terms on collectible invoices. First, they typically check the credit worthiness of your customers and go over your AR aging report. They might make sure your corporate taxes are up to date and check for any liens on receivables. They will most likely do a credit check on you as well. Not everyone qualifies for AR Financing, but the usual parameters are that you have to be a B2B business model. You must have outstanding receivable invoices, and the maximum will depend upon your credit rating and the type of invoices you have. Make sure your credit is healthy to receive the best chance of getting capital from this type of financing.

After your invoices are approved, you could receive 80 to 90 percent of the invoice back within a day or so. The finance company holds the remaining percentile in reserve. Once your client pays the financing company, a processing fee will be deducted from the reserve and the balance will be repaid to you. AR Financing ensures that you will have improved cash flow and allows you to concentrate on your business.