Quick Business Dough – Accounts Receivable
February 6th, 2010 Filed under: Uncategorized — Accounting Author
Let’s say you need some cash for your business. Do you have some customers that are taking over 30 days to pay you? Do you know that you can get that money, often in as little as 24 hours?
Receivable financing is a method used by businesses to convert sales on credit terms for immediate cash flow. Financing accounts receivable has become a popular financial tool in obtaining flexible working capital for businesses of all sizes. A receivable credit line is determined by the financial strength of the customer (Buyer), not necessarily the client (The seller of the receivables). Typically, accounts receivable financing is available in just a few days, not weeks.
What is the ideal size of the business? As long as your business has about $20,000 or more a month in receivables – invoices given terms, such as 30 days, you can find this type of financing. But there is really no limit – huge billion dollar companies do it too. It is most commonly used by companies with sales from $300,000 a year to $35 million.
Often some firms can make decisions primarily on the invoicing process and the credit strength of the debtor (buyer). Factoring companies and banks can analyze accounts receivable and can make a prompt decision within as little as one day. Typically banks that offer accounts receivable financing are slightly less expensive than factoring companies but not always as aggressive.
This solution involves very little underwriting, compared to standard loans. Initial funding can be in as little as 3 to 5 working days. After that, companies often receive funding the next business day after submitting new invoices.
About the author; Jim Frey is a former VP of a $100 billion bank and currently a commercial loan broker, public speaker, author, and coach. Jim provides alternatives and choices for entrepreneurs looking to finance their projects. He really enjoys helping people make it happen. There are still lots of ways to move ahead in business even if the banks aren’t helping much. You can download his free ebook at http://www.doughforthedream.com You can also visit his blog at doughforthedreamblog.com
