Accounts Receivable Basics: How to Use AR Financing
As the holiday season ends, many consumers start worrying about saving their money rather than spending it. This can be a burden to your business. In fact, many factors may lead to slower sales.
If you need help boosting your business’s cash flow, accounts receivable financing or invoice financing might help.
Why Do Businesses Need Invoice Financing?
Many businesses have slow seasons. This is particularly true when it comes to winter. Weather, New Year’s Resolutions and credit card bills might have consumers spending less money than usual. When businesses have a slump during the year, often they have to find some other form of financing to make up for the losses. This helps the business make it through the slow season.
What Is Accounts Receivable Funding?
Invoice financing advances your money based on your outstanding invoices. When you finance invoices, you receive the entirety of the value of your invoices. Likewise, you remain in charge of the collections. This is different from other funding, like factoring, where you lose control. In the case of invoice financing, consumers won’t know that you borrowed the money. To make it even more appealing, you can use accounts receivable financing on anything for your business.
It is a flexible cash solution when you’re cash flow is short. You are able to choose the invoices that you finance. It can be as many as you want. You can even choose invoices as small as $100. If your business hits a slow period when you don’t expect it, a traditional business loan takes weeks to months to go through. If you need money right away, traditional loans won’t help. This is often the case when you enter a slow period suddenly.
How to Utilize Accounts Receivable Funding
If you receive money through accounts receivable financing, it’s important that you plan to keep your business profitable. If you weren’t in a slow sales period due to the season, then figure out what caused it. In addition, you can use invoice financing to save money for later. If you budget and save, you may not have to borrow more when your cash flow slows down again. Most businesses have slow periods and need financing.
No matter why you need the extra cash flow, you can’t always rely on traditional funding. Traditional bank loans might take too long. Invoice financing is attractive to many business owners because they receive the total of their invoices and you can get the money right away.