How Accounts Receivable Financing Works
Hi there,
When your business is in need of immediate cash, one option worth looking into is factoring receivables. Accounts receivable financing turns invoices and accounts receivable to cash or lines of credit and effectively delegates your bill collection activities elsewhere.
Here's how the process works:
- You sell your invoices at a discount - Businesses do this to to receive a cash advance quickly, without having to wait for a customer to pay the invoice.
- Invoices are used as collateral - In this factoring arrangement, the financing company gives your business an amount equal to a reduced value of the unpaid invoices or receivables.
- Paid invoices go to the finance company - Once all the invoices or receivables are paid in full, all the amounts advanced go to the finance company, and the remainder goes to your business.
This type of factoring arrangement helps fill any cash-flow gaps, while also shifting the risk of default to the financing company instead of your business. For more information on accounts receivable financing and how it could benefit you, contact our team.
Thank you,
Daniel Eke
Factor Funding Co.
