When it comes to finding the perfect solution for dealing with cash flow shortfalls, businesses have few options. In some cases, businesses will apply for and obtain a commercial loan, however this process is lengthy and complicated, often requiring companies to have been in business for many years and have well established credit in order to qualify for a loan and companies in many different industries simply don’t qualify at all due to the nature of their business. Those who do qualify must submit a large number of complex documents including a business plan, company and sometimes personal financials, and guarantees. The underwriting process can take weeks before the loan is approved and the company is funded.
Other companies will take another route, turning to the principle owners or investors to provide the cash they need to obtain the raw materials and/or equipment they need in order to fulfill customer orders. Business owners and investors may be hesitant to offer additional capital to a business that appears to be struggling with a cash shortage and require a substantial ownership stake in the company, which may alter the ability of the company to govern its own affairs.
However, rather than try to qualify for a loan or sell off a stake in their business, many companies turn to accounts receivable factoring companies instead. Financing receivables refers to the process whereby companies sell off open invoices in exchange for a lump sum of cash. This is not a traditional financing arrangement in that financing receivables is a sales transaction and not a loan. There is no repayment requirement and no debt is entered onto the company’s balance sheet. It is a fast way to convert future payments into usable cash today.
During the application and approval process, accounts receivable factoring companies focus on the creditworthiness of a company’s customers rather than on the creditworthiness of the company itself. account receivables are evaluated based on the factor’s ability to collect on them. The better the chances of collection, the more an invoice is worth to the factor. There is no dependence on the company to repay the advance, ever.
Receivables financing offers companies an easy way to raise the capital they need to cover day to day expenses, large orders, the purchase of new equipment or even to finance the purchase or lease of a new facility. There are no restrictions on the funds, which means that the company can use the money to cover payroll, pay taxes or cover any other expense they have at their own discretion. Since this isn’t a loan, there is no need to repay the advance, leaving future cash flows intact.
So, if your business is in need of cash in order to cover a large, unexpected order, to cover a temporary shortfall of cash or to expand your business in order to grow, consider receivables financing. The process is quick and easy, especially if you turn to a trusted and reliable company such as Universal Funding. For more information regarding the services Universal Funding provides or how receivables financing works, please visit www.universalfunding.com.
Universal Funding is an industry leader for Financing Receivables. For more information, please visit financing receivables or account receivables.
