Much has been said about the benefits of using accounts receivable financing for regular cash management. So much so, in fact, that many managers and business owners overlook how great it can be as a resource for one-time capital infusions. If you have a cash management strategy that does not rely on regular AR financing and an opportunity arises to take on an extra project or meet a seasonal demand, tapping into your unpaid invoices can provide you with the capital to make your money and move forward. That makes it great for companies looking for a strategy that helps increase their overall sales volume.
How Long Do Application Approvals Take?
Unlike loans or first-time approvals for credit lines, accounts receivable financing offers take just a day or two to process. In many cases, you hear back with a first offer in about 24 hours, and then negotiating the final deal takes one to three days, depending on the lender’s needs and your responsiveness. If you use this as a periodic tool and work with the same company a few times a year, subsequent approvals tend to go even faster.
How Much Does AR Financing Cost?
Financing your accounts tends to have costs comparable to other forms of short-term financing, but there are a few benefits that offset them. As a result, it is often the best deal. Since the lender takes over payment collection and processing, you avoid a lot of administrative work that usually goes with invoice follow-up and receivables tracking. When you build a relationship with a single service and groom your client list to cut ties with people who pay excessively late, the costs go down considerably.
Finance as Needed
Once you have new invoices on the books, you have a new option for working capital when you need it. Many businesses use this for cash infusions whenever customer payments cause a cash crunch. Others tap them strategically to take advantage of opportunities for windfall profits. However you use accounts receivable financing, it remains a fast and low-cost way to use your business assets to get money.
The more invoices you have on hand, the more capital you can access at once. That means sporadic use of this tool to multiply your cash on hand at critical moments can be the key to unlocking higher average sales year over year. Like any financial tool, though, there is a lot that depends on your timing and your understanding of your business’s niche in the local industry.