4 Reasons To Consider Accounts Receivable Financing

If you are a small business in need of funding, there are multiple options available to you. While your first instinct might be to apply for a traditional bank loan, this isn’t the only way to get the money you need. Another option to consider is accounts receivable financing. There are several benefits to this.

  1. Flexibility in How the Money Is Used

One important distinction between AR financing and a loan is that you can use it however you see fit. While it is not always the case, many loans may have requirements or limitations on how the money can be spent, such as for equipment or a particular project. This can be frustrating if you decide that other financial matters are more urgent.

  1. Quicker Funding

The process of applying for a loan can take a lot of time and energy. There is often quite a bit of paperwork involved and many requirements to meet. As a result, it can take several months before you are approved and have access to the funding. With accounts receivable financing, this is not the case. AR financing can be approved in a matter of days.

  1. Less Financial Burden

When you use AR financing, you are selling your outstanding receivables to the financing company. This means that you are not obligated to repay anything since this agreement is not a loan. This not only means that you don’t have to worry about expenses like late fees or interest but also that your monthly budget does not need to change.

  1. No Need For Collateral

Depending on how long you’ve been in business and other factors like your credit history or annual revenue, some lenders may require you to provide collateral when applying for a loan. AR financing does not have this requirement. With this type of financing, your accounts receivable function as collateral. This results in less risk for your business as you don’t have to be concerned about losing important assets like equipment and other property.

Most businesses will need to use financing at some point, whether it’s to expand to a new location, upgrade equipment, start a new project or take care of unexpected expenses. While it makes sense for some to pursue more traditional forms of funding, others will benefit more from alternative lending options. It is worth looking into accounts receivable financing to determine if it will better suit your needs.