In accounts receivable financing, also known as invoice factoring, products or services your company has already produced and delivered are funded today. Your business no longer has to wait 30 to 45 days to be paid.
What is Accounts Receivables Financing?
Money is advanced against unpaid invoices your company is waiting to be paid on by customers. Amounts as low as $5K are reviewed. We will explain how the process works, the features and benefits and how invoice factoring assists a businesses cash flow.
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What are Accounts Receivables?
Accounts receivables is money that your business is waiting to get. Your business has provided products or services to another company. An invoice has been sent to your customer asking them to pay. This is now a receivable.
How can I get money for my accounts receivables?
We work along side your business with the set up, including the contact of your customers. Our staff has expertise in seamlessly contacting the payables department of your customer. As a result, there aren’t any issues with your customer.
How does Invoice Factoring Work?
Example of recent Accounts Receivables Financing Transaction
West Coast Underground has just completed underground piping work for the City of Sacramento. The work is completed and the company invoiced the City for $100,000, but they do not pay for 30 to 60 days after invoicing.
Waiting 1 or 2 months causes cash flow issues. The company needsw the money to start work on jobs for current and new clients. As a result, West Coast Underground applies for Accounts Receivables Financing. They complete a short application and provide an accounts receivables aging schedule.
The provide an Accounts receivables aging schedule. It shows the month to date receivables and invoices more than 30 days old. Based on the qualify of the aging schedule, A/R Financing is approved. The City is familiar with this financing and the payables process is set up.
Within 2 business days, West Coast Underground is advanced $80,000. After the invoice is paid, the company receives the remaining $20,000 minus the financing fee.
West Coast chooses to use this financing for every job it completes with this and other clients. Within 1 month, their cash flow situation improved dramatically. They are now able to immediately purchase raw materials, hire labor and immediately begin other jobs. They can also solicit new clients for future jobs through some advertising programs
Frequently asked Accounts Receivable Financing Questions:
Question: Won’t my business look cash poor if my customers are contacted to set up an accounts receivable financing line?
Answer: Not at all, for several reasons.
1) Many of your clients are factoring and are familiar with it .
2) For many of your customers that have not paid you yet, there is a significant probability that they are paying their vendors and contractors in 30, or even 60 days. Cash flow problems you have are because your customers are not paying for 30 to 60 days after you have finished the job. So they know it is not your business that is the problem, it is the fact they are waiting to pay you! As a result, they are comfortable that their vendors and contractors will use accounts receivable financing.
3) Your accountant contacts the accounts payable department of the companies they invoice. They present the call as they have advised their client to pursue accounts receivables financing. The accountant tell the payables department for cash flow reasons, they are advising you to factor.
Question: Is it hard to qualify?
Answer: The main criteria to qualifying for Accounts Receivable Financing is the quality of the company for which the invoice is outstanding. If the company that is paying the invoice is strong, this type of financing can generally be approved.
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