$5,000 – $1,000,000
Accounts Receivable financing (aka AR Financing) is an alternative form of commercial finance that can provide fast working capital to business owners. It uses a percentage of the company’s accounts receivable as a basis for financing, leaving those who use it with a fast and predictable cash flow. This converts contracted sales into credit terms. This AR financing transfers the default risk associated with the accounts receivable from the borrower over to the financing company.
How does Accounts Receivable Financing work:
The Factoring Company would first approved the business process and then review the company’s outstanding receivables, aging reports and the borrowers credit profiles (the credit score is less important on this financing). After review, the Lender would pick which accounts/invoices they want to fund the financing on. The lender will choose one, many, or all of the receivables to do the financing on and typically advance companies 70 to 90% of the value of their outstanding invoices. The more current and relevant the invoices are, the more appealing they are to the lender (30-90 days). At this point, the borrower would send in their invoices to the Lender.
After the verification process is finished, the funds would be calculated by the factoring company and deposited into the company’s bank account in roughly 24-48 hours.
Pros: Fast, Easy, Affordable Rates