Receivables financing (or receivables finance) is also sometimes referred to as factoring and discounting. By getting involved with this kind of financing you can improve the amount of money that is flowing into your business. By so doing this also improves the output that your company is capable of. Receivables financing can be thought of as the selling of invoices as assets of a company and not as liabilities. This is a method by which a business is able to help find more cash to grow the company without the need for credit or money borrowed through a lending institution. Receivables factoring also offers a business a means of self financing.
Receivables financing is a practice that is being used by more and more businesses all of the time because it can offer a major source of capital for a company strapped for cash in a short duration of time. There is not a lot of waiting around like there is in the case of applying for a line of credit with a bank or applying for a loan.
If you wish to develop your business or to expand it or if you are experiencing a cash flow issue then receivables financing can help you tremendously and can get you to the place where you want to be. You need to do a comparison of whether factoring is the better option for you than going the more traditional route and applying for a business loan through your bank or credit union or a business line of credit. For many small businesses receivables finance is the answer.
Receivables factoring is all about selling the account receivables your company has to another company that would be a third party that would then pay your business for their invoices. This transaction can be immediate which means that you will have cash at your disposal right away to do the things you need to do with it. Many companies end up with a lack of cash because it takes so long to receive the required payments. This concern over the slow rate of cash flow is taken out of the equation when you choose to give receivables finance a try.
The advantages to financing by way of a third party company can give your company a leg up on the competition. All of the invoices you have will be processed by the other company if you choose this option. This means entering all payments that are made, the depositing of all checks and computer report generation. This provides you with more time to work on other tasks that are relevant to your business. It also means that your flexibility in dealing with your customers will be increased and enhanced. You can show a greater level of versatility in the terms that you make available to your customers, thereby allowing for more conversions as well as more sales. This can all be done with no worry over disrupting the flow of cash into your business.