Accounts Receivable Financing

How It Works —

The financier provides funding based on a % of expected Accounts Receivable payments.  The capital that is available to you changes based on the increase and decrease of expected customer payments. You can choose the amount you would like to borrow, pay it back at any time and only pay interest on the borrowed amount.

Example —

You have $1M in expected customer payments. The lender provides you with 80% of your Accounts Receivable ($800k). The financier charges you interest for the amount that you borrow.

You Might Be A Fit If —

• You sell to other businesses or organizations.
• You wait for week or months for customers to pay.
• You have dependable customers that are likely to pay in full.

Why You Would Use This —

• Your customer base is dependable but the timing of customer payments is creating cash flow problems for your business.

• Your high-quality customers can offer you access to funding when business history and other factors might be lacking.

• You can manage the financing costs by choosing how much you want to borrow and payback.

What TO WATCH OUT FOR —

• Some lenders will require an audit or exam by a third-party to properly understand the value of the inventory. 

  • Many times these audits can be done virtually to reduce costs. 

• Lenders typically won’t lend on customer accounts that are significantly past due, in higher-risk foreign countries or have other risk factors. 

  • Seek to understand what makes your lender nervous about certain accounts to find a compromise.

• There might be a fee that you pay based on the amount that you are not borrowing. 

  • Calculate any unused line fees to make sure you aren’t paying a high cost if you don’t plan to use the funds often.