Accounts receivable factoring is a financing option which is ideal for small businesses that typically have a large volume of invoices sent to customers every month, especially if many of them are for large amounts. The problem with that kind of business often stems from the fact that not all customers pay on time, and that can leave your business with a cash flow problem while you’re waiting for payments. Here’s how accounts receivable factoring can help alleviate that kind of cash flow issue.
How A/R factoring works
Each month, you would have the option of selling all or some volume of your accounts receivable invoices to a factoring company, and in exchange for those invoices, you would receive an amount equal to somewhere around 80% of the total value of those invoices. The remaining 20% would be given back to you later by the factoring company, after the invoice amounts have been collected from your customers. The financing company would naturally charge you a fee for its services, and that amount would be subtracted from the money you are given for the invoices. In the meantime, you would have immediate cash in hand, without having to wait for customer payments to trickle in.
Building your business
If you arrange for accounts receivable factoring with an alternative lender, you can set it up on a recurring basis, so that every month you can expect approximately the same amount of income from your A/R receipts. This amounts to steady and positive cash flow, which is a situation most small businesses simply don’t get to enjoy very often. Being able to plan for business expenses and for business growth are both much easier when that steady income is predictable every month, from the factoring cash. Plans for budgeting and growth without steady cash flow are almost impossible, so from this perspective, accounts receivable factoring can provide a tremendous support to your business.
Accounts Receivable Factoring with Goldendale Capital
If accounts receivable factoring is right for your business, contact us at Goldendale Capital, so we can put cash in your hands for whatever business purposes need addressing. We offer favorable terms for small businesses, to help improve cash flow, and stabilize finances for your business.