The business world is a tricky one, and for many new business owners, the regular problem they might run into relates to finances and loans. If you are a budding entrepreneur, you may not always get credit or business loans when you need it. You may want to grab an opportunity for your company, but are lacking sufficient funds.
This is where accounts receivable or A/R financing comes in. If you are not completely familiar with A/R financing and its benefits, TAB Bank shares more information to help you out.
About A/R Financing
A/R is an arrangement that uses the company’s receivables as collateralfor a financing agreement. Receivables are outstanding invoices or money that is owed by customers who haven’t paid you yet. An A/R agency factoring company will give you an advance of around 70-90% of your invoices, and then provide whatever is left of the collected amount, excluding the factoring fee.
When Should I Use it?
There are many reasons one might need the help of a factoring company. It is ideal if your capital is flooded with debt. It also allows you to have flexible financing with maximum potential for improved cash flow. It can help you get the benefits right away, such as big discounts from suppliers.
Is it the Same as a Loan?
It is not the same as a loan. Make sure your transaction is a factoring arrangement and not a loan and check if the deal promises you a prime rate or the varied interest amount. Find out how they calculate the prime rate and whether it is a part of the factoring.
Getting A/R financing can save you time and get you the opportunities you want immediately. If you are still unsure about the process and how it could benefit you, you can talk to your trusted banking institution. They will happily provide you with the necessary information and will guide you every step of the way.