Whether you are just starting out or you’ve been in business for a while, you will likely find yourself in need of additional money at some point. There are many routes that you could take to get funding for your company. If you are finding it difficult to be approved for a bank loan or would just prefer something else, one option to consider is accounts receivable financing. In most cases, a financing company will buy your outstanding accounts; however, they can also be used as the collateral in a loan.
When Should You Consider It?
There are many situations in which you may decide that this is the right kind of funding for your business. One common obstacle to obtaining a traditional loan is your financial history. If you have had trouble making payments on time in the past or have a low credit score for other reasons, it can make it more difficult for you to qualify for a loan. It may also be a preferable option if you have already taken on a substantial amount of debt and would like to avoid adding more.
What Are the Benefits?
In comparison with a bank loan, there are some pros to using accounts receivable financing. If you are selling your assets, you don’t need to worry about paying anything back unlike a loan that can come with fees and high-interest rates on top of what you borrowed. The process of applying and being approved for a loan can also take some time, and it can take even longer to receive the cash you need after your approval. With AR financing, you usually won’t have as much of a wait.
What Is Required?
Other types of financing can have strict requirements, but when you are using AR financing, things can be a little more flexible. While the financing company may look at your history and credit score, you likely won’t need to have as high of a score as you would with a bank. You will need to supply information about your business as well as the invoices you are planning to use for financing.
If you have had trouble meeting the requirements for a loan, don’t lose hope. Banks are not the only source that you can use to fund your business. You may have better luck with an alternative method such as accounts receivable financing. Look into different financing companies to find the best fit for your business.