Accounts receivable factoring has become a staple financing option among industries including:
- Wholesale distributors,
- Transportation companies,
- Tech companies,
- Medical and dental practices,
- Automotive shops, and
- Service businesses
And more. With immediate access to working capital, business owners nationwide are using AR factoring to accomplish tasks including:
- Take on More Contracts
- Bridge Slow Customer Payments
- Fill More Customer Orders
- Increase Cash Flow
Without having to wait for slow customer payments (or for medical and dental practices, slow healthcare payments).
- What is Accounts Receivable Factoring?
- How Does Factoring Accounts Receivable Work?
- Do You Qualify for AR Factoring?
- AR Factoring Interest Rates and Terms
- Accounts Receivable Factoring Advantages
- Accounts Receivable Factoring for Construction
- AR Lines of Credit for Wholesale Distributors
- Transportation Accounts Receivable Factoring Uses
- AR Financing for Medical Practice Use
- Accounts Receivable Line of Credit for Service Businesses Uses
- AR Factoring Uses for Tech Companies
- Using Automotive Accounts Receivable Factoring
- Using AR Financing for Manufacturing
- AR Factoring: A Use for Any Industry
- How to Apply for Factoring Accounts Receivables
What is Accounts Receivable Factoring?
Accounts receivable factoring is a way for businesses to leverage their receivables in exchange for cash.
Customers will not be notified if you use AR financing, making this the ideal choice over purchase order financing for business owners who wish to protect their reputation.
The capital borrowed typically takes the form of an AR line of credit, which business owners can borrow from at will.
For companies with solid credit who are capable of paying their invoices on time, this may be the ideal option for businesses that seek additional funding as quickly as possible.
These funding vehicles will allow businesses to maximize their cash flow and improve their position by selling off their accounts receivable.
This way they can generate the capital that allows them to convert their idle invoices into liquid funds.
How Does Factoring Accounts Receivable Work?
First, a business owner essentially sells their accounts receivables to a lender. These receivables will act as collateral, in case of foreclosure.
Borrowers then receive a revolving a line of credit in exchange. This credit line offers a fast and flexible source of capital that they can then draw from as needed.
The maximum amount of capital you can draw from is determined largely by the amount offered by your receivables leveraged.
With an accounts receivable line of credit, you don't have to use what you don't take out. Instead, draw only the amount you need, and the rest will still be available to use when you need it.
This AR factoring a financing option with greater flexibility and a lower cost of capital compared to standard small business loans.
The "revolving" nature of AR factoring allows you to add capital back into your credit line, where it gets added back into your total maximum. This capital can then be withdrawn once again if needed.
Do You Qualify for AR Factoring?
All you need to get approved for accounts receivable factoring is:
- 6+ Months in Business
- $40K/Monthly Accounts Receivables
No minimum FICO or additional collateral (besides your accounts receivables) are needed to get approved.
AR Factoring Interest Rates and Terms
Accounts receivable lines of credit follow True APR, which is a generally lower and more cost effective means of interest compared to factor rates, which are common among small business loans.
Here are the terms that come with AR financing through NBC:
- Financing Amount: AR Factoring offers amounts anywhere from $10K-$5 Million.
- Flexible Terms: With revolving credit lines mentioned earlier, you are in total control as to how you manage financing your business.
- Time to Fund: 2-5 days; minimized paperwork and expedited funding makes AR factoring one of the fastest financing options available.
Accounts Receivable Factoring Advantages
- Prepare your business to immediately take advantage of opportunities, and solve any challenges that arise with working capital.
- Take on more customers, and get what you need to fill their orders without having to wait for payments.
- Cover gaps between payments, and use the capital to pay for overhead expenses, and keep operations running smoothly.
- Purchase materials and supplies in bulk, without having to worry about paying for what you don't use.
- Get the working capital you need to hire staff, boost inventory, purchase equipment, manage payroll, and virtually any other financing need.
Accounts Receivable Factoring for Construction
Contractors are using AR financing to turn their receivables into a source of funds to:
- Purchase, lease or upgrade heavy equipment
- Lower costs on foreign and domestic materials
- Hire builders, architects, operators, and other types of workers
- Take on more projects
AR Lines of Credit for Wholesale Distributors
AR lines of credit are a great way for wholesale distributors to:
- Fill orders from impatient customers on time-or ahead of schedule
- Cover transportation expenses, fees and insurance payments
- Keep up with overhead expenses
- Grow and expand warehouse operations and capabilities
Transportation Accounts Receivable Factoring Uses
- Add new vehicles to your fleet
- Cover vehicle fees, repairs and insurance costs
- Hire additional drivers
- Provide faster service to more customers
AR Financing for Medical Practice Use
- Cover slow healthcare payments
- Pay for medical or dental supplies in bulk
- Cover office expenses and utilities
- Purchase, lease or upgrade medical equipment and machinery
Accounts Receivable Line of Credit for Service Businesses Uses
- Act on customer demands faster
- Get new equipment and supplies
- Cover overhead expenses
- Add more vehicles to your fleet, if needed
AR Factoring Uses for Tech Companies
- Purchase security and safety equipment
- Update machinery, tools and inventory
- Cover overhead expenses including hiring staff, and utilities
- Service more customers with increased speed and efficiency
Using Automotive Accounts Receivable Factoring
- Purchase domestic and foreign auto parts at lower costs
- Acquire auto materials and supplies faster and more frequently
- Hire auto service workers, and manage payroll
- Update automotive machinery, tools and supplies
Using AR Financing for Manufacturing
- Adapt to industry changes involving tariffs
- Fill customer orders faster and easier
- Update manufacturing machinery and heavy equipment
- Hire equipment operators and additional staff
AR Factoring: A Use for Any Industry
Immediate access to cash whenever you need it is an extremely helpful tool for any business that is constantly having to make unexpected purchases, and solve unexpected challenges.
Accounts receivable factoring gives you this opportunity.
Cash flow challenges prevent many businesses from managing their day-to-day expenditures or to fulfill business goals such as expansion.
Besides accounts receivable factoring, National Business Capital can also recommend additional financial tools that will allow small businesses to fulfill monetary obligations, and to sell products and services.
For example, NBC can also assist these firms to establish a business line of credit that provides quick access to additional capital when needed.
Through AR factoring, we have assisted companies all over the country to improve their existing business, but also to position themselves well for the future. Contact us and let us go to work to find your business the business financing it requires to thrive.
How to Apply for Factoring Accounts Receivables
All you need to do is fill out a 60-second application online to get started right away. Or, you can give us a call at (877) 482-3008 to ask any questions, and see if AR financing is the best option for you.
After applying, you will be contacted by a Business Financing Advisor (BFA) to discuss your options moving forward.
You will then remain in contact with your BFA throughout the funding process to ensure you get the capital you need as quickly and easily as possible.