CandleFocus Glossary Editor
Accounts receivable financing is a type of financial transaction where companies exchange their outstanding customer invoices for direct access to cash. While this financing option is aptly named, as it does involve receiving payments for receivables, the trade-off is the business must pay interest or fees on those receivables. This form of financing is generally used if a business needs to bridge a cash gap or has temporarily waived their customer credit terms. Accounts receivable financing has grown in popularity due to advances in technology, making it an increasingly accessible financing option for businesses of all sizes.
A company that enters into an accounts receivable financing arrangement makes a one-time transaction where they sell a portion or all of their existing customer payments to a financing provider. In return, the business receives a pre-established cash advance–typically up to 80% of the value of the customer invoice. That customer invoice can be for single item or for a set of customer invoices. The remainder of the invoice is paid once the customer pays in full. In the event the customer does not pay their invoice on time, the financing company assumes all the risk.
The major benefit accounts receivable financing provides is a quick conversion of invoice payments into immediate cash, as opposed to waiting for customers to pay their invoices on a net-30, net-45, or other delayed terms. Companies can use this cash for a variety of operations, such as purchasing more inventory, hiring more employees, or investing in another business. Businesses also benefit from increased flexibility, as financing options are no longer limited by the credit terms of their customers.
Some of the most beneficial features of accounts receivable financing are the quick access to funds and the ability to accept more customers or take on larger orders. Not only does it help a business remain afloat, but it also helps with long-term growth. Companies no longer have to worry about sales that take too long to pay off or that adversely affect their cash flow. They also don’t have to wait for a customer to pay them before they can invest in growing their business.
Accounts receivable financing offers businesses a fast and easy access to cash that can help it grow and expand. It is a financing option where invoices are exchanged for direct access to funds to businesses of all sizes. In a typical accounts receivable financing arrangement, a company will receive a pre-established cash advance for a portion or all of their existing customer payments. The major benefit for businesses is that it eliminates the need to wait for customers to pay off invoices, giving them more control over their cash flow and the ability to take on larger orders. Accounts receivable financing gives businesses the financial flexibility needed to weather turbulent times, invest in their future growth, and ultimately succeed.
A company that enters into an accounts receivable financing arrangement makes a one-time transaction where they sell a portion or all of their existing customer payments to a financing provider. In return, the business receives a pre-established cash advance–typically up to 80% of the value of the customer invoice. That customer invoice can be for single item or for a set of customer invoices. The remainder of the invoice is paid once the customer pays in full. In the event the customer does not pay their invoice on time, the financing company assumes all the risk.
The major benefit accounts receivable financing provides is a quick conversion of invoice payments into immediate cash, as opposed to waiting for customers to pay their invoices on a net-30, net-45, or other delayed terms. Companies can use this cash for a variety of operations, such as purchasing more inventory, hiring more employees, or investing in another business. Businesses also benefit from increased flexibility, as financing options are no longer limited by the credit terms of their customers.
Some of the most beneficial features of accounts receivable financing are the quick access to funds and the ability to accept more customers or take on larger orders. Not only does it help a business remain afloat, but it also helps with long-term growth. Companies no longer have to worry about sales that take too long to pay off or that adversely affect their cash flow. They also don’t have to wait for a customer to pay them before they can invest in growing their business.
Accounts receivable financing offers businesses a fast and easy access to cash that can help it grow and expand. It is a financing option where invoices are exchanged for direct access to funds to businesses of all sizes. In a typical accounts receivable financing arrangement, a company will receive a pre-established cash advance for a portion or all of their existing customer payments. The major benefit for businesses is that it eliminates the need to wait for customers to pay off invoices, giving them more control over their cash flow and the ability to take on larger orders. Accounts receivable financing gives businesses the financial flexibility needed to weather turbulent times, invest in their future growth, and ultimately succeed.