Smaller and newer businesses quickly act on growth opportunities and look for ways to better serve their customers. However, as they don’t have enough working capital, it can become difficult for them to respond to opportunities. At some point, cash flow can stall or go negative and having resources to bridge the gap can help the business.
That is why many small businesses turn to accounts receivable financing to keep things running smoothly in case of a cash flow gap. If you own a new, small business, you should learn more about how accounts receivable financing helps your businesses grow. Accounts receivable financing is right for your business if the following speaks of your current business situation.
You have a New Business
Typically, new businesses don’t have lots of capital. Being able to meet payroll, purchase raw material and invest in a new idea can either make or break the organization. Often, start-ups cannot get a bank funding.
Selling accounts receivables can help the business get money without taking on debt. It is just important for the receivables to be associated with clients who have a solid credit history. The financing company will consider the client payment history of the start-up business and their overall credit history.
You are Experiencing a Sudden Growth
While a sudden growth is not bad news, an unexpected sales surge may leave you struggling to stay afloat. Such growth may require you to have additional supplies for more people, manufacturing and more money to for the bills. For this case, you can benefit from accounts receivable financing.
You are Looking for Expansion
A business expansion is usually an exciting prospect. However, this can usually come with some challenges. You may have to invest in new equipment and employees to get the expansion up and running.
You Try to Deal with Seasonable Sales
Some businesses experience seasonable sales. And the high demand for the merchandise or engagement in upcoming events can lead to sales surge. In this case, accounts receivable financing can help you.
You have a Solid Customer Base
A lot of financing companies may give you accounts receivable financing if you have paying customers with good credit standing. Although overdue accounts can be utilized as collateral, a number of lenders choose to deal with customers with less than ninety days late.
You Cannot Get Funds from Conventional Lending
You can get a business loan after lenders will find you creditworthy. The evaluation takes time and the lenders will require you to provide necessary documents to establish your qualification for a loan. But new business will have a tough time getting quality loan rates as the risk to lenders is higher. And if you don’t have collateral, this will stand in the way of getting approved for the loan.