Remember that Foreigner song “Love Isn’t Always On Time”? You could say the same about money when running a business. More importantly,
the thing about running a business is all in the timing.
When the check’s in the mail, as the old saying goes, but you need that money to buy goods now, you are in luck. There is something called financing receivables that takes care of the problem, at least in the meantime.
Even When Receivables Are Old Or Late
The other plus side of financing receivables is that if you are owed money from a long-outstanding debt, you can get some relief. You would get a fraction of the money in the system called factoring.
The overall solution to the predicament is called accounts receivable financing. The asset financing arrangement receivables, or money owed to a business, is put up for collateral. The collateral is for a financing agreement in financing receivables.
In return for the deal, the bank or financier takes a portion of the receivable. The business receives a reduced value on the receivables they pledge.
Now while old receivables will work as collateral toward merchandise, the age does impact the fund amounts. That’s a part of factoring.
Yes, Virginia, Your Business Gets Its Money
That does mean that there is a way out when a customer, particularly a big one, appears to be so late that they could potentially default on its debt. It is a great way for a business that needs money to cover new purchases.
It frees up money that is otherwise stuck in limbo associated with accounts receivables. Rather than spending money to collect on a debt that appears like it will never happen into the present day business operations. It’s like shifting focus from trying to squeeze water out of a rock to well — handling money. There is little comparison, but the latter example serves your needs better.
There’s A Broker For That
In business, the financial companies are more specialized than in personal banking and loans. Of course, there’s a factoring lending broker.
Big Or Small Companies Benefit
In some cases, big business gets all the attention and the tools to assist the big financial fish. Well, businesses of all sizes need brokers who capitalize accounts receivables when waiting for cash. Fortunately, they serve all kinds and sizes of business.
The key is to look for brokers who specialize in the same class of revenue, industry, and length of time lending. Getting cash flowing paints a rosier picture of your business too. It increases the appearance of your company’s efficiency with regard to receivables, and collections to improve inventory turnaround time.
Being able to make purchases today allows for more relevant goods to be purchased for today’s needs. That may improve inventory turnaround time substantially. Look at how your business picture could improve with the help of an accounting receivables broker.
They can help provide assistance. Where the picture is actually ok but the banks say no, this is a good alternative option.