If your small business is in need of working capital, and you don’t have many financing options available to you, you might want to consider either accounts receivable financing or factoring to supply the needed cash. Below you will find a description of the two transactions, so you will know which might be more advantageous for your particular small business.

Accounts Receivable Financing

This type of financial transaction is much like a secured loan, in that it requires some kind of physical asset like property or equipment as collateral. There are generally some fairly strict qualifications associated with this kind of financing, but if you’re approved, you would be able to receive somewhere between 70% and 95% of the asset value very quickly. In this arrangement, you don’t actually sell the assets which constitute accounts receivable, since they are only being used as collateral. You’ll still have to collect on any payments from customers which are owed to you, and in the meantime you can use Accounts Receivable financing just like a line of credit. Once your outstanding credit line has been paid back, you will be eligible to make a new draw on your account.

Factoring

With invoice factoring, a company will actually purchase some or all of your monthly invoices for an amount which is between 70% and 95% of their face value. At that point, the factor then owns those invoices and becomes responsible for collecting payments from your customers. After having collected those payments, the factor will then remit the remaining balance (either 30% or 5%) of the unpaid invoices to you, after subtracting out its factoring fee. In this way, you receive upfront cash very quickly, without having to wait the standard 30, 60, or 90 days for customers to pay those invoices.

Would either of these two options help your small business? 

Factoring or accounts receivable financing are both options which can help a small business tremendously. If you’ve been considering one of these financing options, contact us today at Commercial Capital Finance, so we can discuss some possibilities.