Owners of small companies and businesses know that challenges are likely to be met when acquiring capital in meeting shortages in cash flow or when having business expansion. When the financing options of a business are limited such as credits and loans, many opt for accounts receivable financing. However, it is important to remember that prior to making such move, it should be evaluated if such is indeed needed. One wrong move could mean the end of a business especially for those with a small scale capacity. People should know some insights about receivable financing before making it a choice.
Account receivable financing is basically the selling of receivables to a finance or factoring company. The risks are then assumed and offers business quick cash. The value of the amount that the factoring company will have to assign to the account is largely determined by the age of the receivables. Current receivables pay more compared to older ones. One will not be financed when the receivable is more than three months. Accounts receivable factoring or accounts receivable funding is another term for account receivable financing. The following are some of the advantages of receivable funding.