If you are running a small business and have been denied a traditional loan you may be in a bit of a quandary. Don’t throw in the towel yet! There are alternative financing options that may be a great fit for your operation. One of these may be accounts receivable financing.
What is Accounts Receivable?
Accounts receivable financing is a specific type of financing that may be highly suitable for certain types of businesses when an infusion of working capital is needed. In a nutshell, it works like this: You sell your outstanding invoices to a third party – the financing agent – who pays you slightly less than the face value of the accounts receivable. You get this money as an upfront lump sum to use with few if any, restrictions. The agency hopes to make a profit by collecting the full value of the receivables.
Any business that sends out invoices may be a good candidate for this type of financing. Medical, dental, and veterinarian offices are examples of a good fit business.
The Pros and Cons of Using Accounts Receivable Financing
As in other financing options, account receivable financing has both positive and potentially negative aspects to consider. On the positive side, your funding arrives rapidly, your credit history is only minimally important, and you do not need to chase down your sold invoices. On the other side of the coin, you are giving up the full value of the outstanding invoices. You are losing direct control of collecting payments on your invoices. Also, if your customers have poor credit histories, it may be harder to obtain this type of financing.
Connect with Lode Capital
Accounts receivable financing may be an excellent solution if your business needs additional working capital and you don’t have perfect credit. Here at Lode Capital, we are experts in alternative funding for small businesses. One of our most popular programs is accounts receivable financing. Give Lode Capital a call today to learn more.