Receivable funding is giving your business access to immediate capital.
Receivable funding has many advantages to more traditional financing options for your business. It gives your business the opportunity to sell accounts receivable invoices to a “factor” which can give your business access to instant working capital.
There are many advantages to receivable funding including the following:
- Invoice processing – The factors will basically work for you by processing invoices through posting them, depositing checks, entering payments, and putting together computer reports for you. This can eliminate a lot of work for a small business.
- Offer terms to customers – You can increase sales tremendously by offering credit terms to customers or by increasing current terms to them. You can do this without negatively affecting cash flow.
- No limit on capital – You have unlimited access to capital with receivable funding because it grows as your sales grow.
- Inventory Discounts – You can save money on inventory by having the capital to take advantage of early payment discounts or by purchasing in larger volumes to receive discounts. This can reduce the cost of factoring.
- Discontinue early payment discounts – Receivable funding enables you to stop giving customers discounts for paying early because you have access to the capital so quickly. This will increase your bottom line.
- Stay in control – You can maintain full control of the company with factoring because you don’t have to give up equity to venture capitalists or other investors. You aren’t forced to take on additional partners which can limit your control as the owner.
- Elimination of bad debt – A non-recourse factor will assume the risk of bad debt, thus eliminating this expense from the business’ income statement.
- No additional debt – Receivable funding allows your business to get financing without incurring any debt. This gives your business flexibility without the headache.
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