Accounts receivable financing allows companies to get paid for their outstanding invoices prior to their deadline dates. In return for a fee paid to an alternative lender, any company can sell some or all of its customer invoices, thus being paid immediately for them. There are three basic types of Accounts Receivable financing that you might consider taking advantage of, in order to obtain upfront cash.
In this financial product, a company would receive approximately 80% of the face value of its invoices upfront, while the lender takes ownership of those invoices and pursues collection of them. Once customers pay the lender the amounts due on those invoices, the lender would then remit the remaining 20% of the invoice value, after taking out its factoring fee.
Selective Receivables Financing
As you might guess from the name, in this process the company would choose which of its receivables to submit to a lender for early payment. One difference with traditional factoring is that the company would receive full payment for each invoice at the outset, rather than waiting for a partial remittance after invoices have been paid. Financing rates are generally lower with selective receivables financing, and because this does not appear on a company’s balance sheet, it has no influence at all on other debts a company may have and therefore does not impact its debt ratio.
Companies that engage in asset-based lending commit most of their receivables in this process, having very little flexibility or selection in which receivables are submitted to a lender. There are generally higher fees associated with asset-based lending, but it is still beneficial to any company choosing to make use of this financial product.
Interested in accounts receivable financing?
Talk to us about your interest in accounts receivable financing, because we may be able to set you up on a program with our company. Contact us at Integrity Financial Capital, and let us help you obtain the financing you need.