If your business has trouble keeping its cash flow steady, you’re not the only one. Many small businesses face this situation several times a year. After all, it’s not surprising for customers to change the size of their orders or take longer to pay some months. Fortunately, there’s a solution that has helped countless business owners make things better for their companies’ financials. It’s a great alternative financing option called accounts receivable financing, or factoring. How easy is it to get started?
Is Qualifying for Accounts Receivable Financing Difficult?
The first step in getting started with AR financing is filling out the application. The financing company needs to perform due diligence to make sure your company and customers are trustworthy. The good news is that qualifying for AR financing is a breeze. One reason for this is that it’s not really your business that needs to be checked, but your customers.
AR financing works by advancing you capital in exchange for unpaid invoices. As long as your customers have a history of paying their bills on time, you can generally qualify quickly. To see this information, the factoring company will request a normal invoice aging report from your accounts receivable department.
The reason the credit quality of your clients matters is that the factoring company needs to be sure the invoices will be paid. Clients who have good credit can provide a great source of income for your business.
What else do you need to submit with the application? Aside from information about your clients, you only need basic business information, such as the name of your business and your background. You don’t have to submit tax returns, balance statements or anything like that. Your company doesn’t need to perform any credit checks either.
Is Outsourcing Your AR Department Hard?
Another option for AR financing is to let the factoring company take over your complete accounts receivable department. This is more than just using a few unpaid invoices to get an emergency infusion of capital when you need it. Outsourcing your AR department provides a constant flow of income for your business every month while simplifying billing. You don’t have to hire staff to take care of this.
Qualifying for this type of service is relatively easy, but you do need to provide a few more documents. For example, the financing company will want to see your financial statements to make sure there are consistent sales to work with. Many businesses use this model, from e-commerce companies to hospitals.
If you meet these simple qualifications, you can get started with AR financing in a few days or a week.