News

Financing Accounts receivable – Approach “without debt” to grow your business

There are very few practical ways for businesses to grow without debt. Over the years, debt is the recommended method for business expansion. This approach to commercial financing is almost no longer an option. With banks adhering to their money getting tougher, it becomes almost impossible for businesses to get the capital they need to grow. The inability to receive money through bank loans has exceeded a feeling of frustration with despair. The company is forced to remain stagnant even in the industry with growth potential there because no one will lend them money. What many companies do not know is that there are ways to secure capital that does not require them to use debt or apply for bank loans. This is called accounts receivable financing.

Financing Accounts receivable is a simple and fast way for companies to increase capital. Maybe the best biggest advantage is that it can be done without taking new debts. This process works like this. A business, known as a factor, buys a company invoice that wants to sell it. They do it with a discount rate, usually for between 70% and 90% of the total invoice value. This money is paid upfront. They then act as billing agents and will collect, the money payable by the customer. This might involve them to send letters and make phone calls if necessary. All original payment settings will remain the same. After they (factors) have received maturing payments, they will return money to their company buy invoices from, minus the amount and cost of their payment.

This is a great way for companies to grow their business with “no debt.” Instead of borrowing money, they use the customer invoices they already have. Instead of a business waiting standard 30 to 60 days to receive money payable to them by their customers, they can get it in just 24 hours (and generally not more than 7 days). This can be very meaningful for business poor money. This is especially true in the current economy. When every dollar is often needed to keep the door open, it may be difficult to wait for months at a time to receive the money needed by the current company to continue to operate

In order for companies to utilize accounts receivable, they need to have customers with excellent credit. This is even more important than their own credit history (whose factors will not be considered). These factors must feel confident that they will be able to collect the money they pay for invoices. Without customers with good credit, businesses will not be able to use accounts receivable as options. For these companies, unfortunately, it may be necessary to take business debt through bank loans.

Related Articles

Check Also
Close
Back to top button