Unlock Cash Flow with Accounts Receivable A/R Factoring
Receivable factoring, also known as accounts receivable factoring or invoice factoring, is a financial transaction and a form of debtor finance. In receivable factoring, a business sells its accounts receivable (invoices) to a third party (called a factor) at a discount. The factor then collects payment on those invoices from the business's customers.
This allows the business to receive immediate cash for its invoices, improving cash flow and providing funds for operations, growth, or other financial needs. Factoring can be a useful tool for businesses that need to manage cash flow but may not qualify for traditional loans or lines of credit.
Accounts receivable factoring is a financial tool that offers several benefits to businesses looking to improve their cash flow and manage their accounts receivable effectively.
Here are some additional points about accounts receivable factoring:
Immediate Cash Flow: Factoring provides businesses with immediate cash by selling their accounts receivable. This can help businesses meet their immediate financial obligations, such as paying suppliers, employees, or utility bills.
No Debt Incurred: Factoring is not a loan, so it does not add debt to the business's balance sheet. Instead, it is a sale of assets (invoices) at a discount.
Improved Cash Flow Management: Factoring can help businesses manage their cash flow more effectively by converting accounts receivable into cash quickly. This can be particularly beneficial for businesses with seasonal or fluctuating cash flow.
Outsourced Collections: Factoring companies often take over the collection process for the invoices they purchase. This can save businesses time and resources that would otherwise be spent on collections.
Credit Risk Management: Factoring companies typically assess the creditworthiness of the business's customers before purchasing invoices. This can help businesses mitigate the risk of non-payment and bad debts.
Flexibility: Factoring arrangements can be tailored to the specific needs of the business. Businesses can choose which invoices to factor and how often to use factoring services.
Access to Working Capital: Factoring provides businesses with access to working capital without the need for traditional financing. This can be especially beneficial for businesses that do not qualify for bank loans or lines of credit.
Scalability: Factoring can grow with the business. As the business's sales increase, so does the potential for factoring, providing a scalable source of working capital.
Focus on Core Business: By outsourcing the collection of accounts receivable, businesses can focus on their core operations and growth strategies.
Here are 3 hypothetical case studies showcasing how manufacturing, staffing, and construction companies could benefit from factoring accounts receivable:
Manufacturing Company - Overcoming Cash Flow Challenges:
Business: SteelCraft Manufacturing
Challenge: SteelCraft Manufacturing, a steel fabrication company, faced cash flow challenges due to long payment cycles from clients.
Solution: SteelCraft Manufacturing partnered with LVRG Business Funding for $2,500,000 accounts receivable factoring.
Benefits: By factoring their accounts receivable, SteelCraft Manufacturing was able to access immediate cash flow to cover operational expenses and payroll. This helped them bridge the gap between invoicing and receiving payments, ensuring smooth operations and financial stability.
Staffing Company - Funding Expansion:
Business: TalentPro Staffing Solutions
Challenge: TalentPro Staffing Solutions wanted to expand its services to new markets but lacked the necessary funds.
Solution: The staffing company utilized accounts receivable factoring with LVRG Business Funding.
Benefits: With a $1,250,000 factoring from LVRG, TalentPro Staffing Solutions received immediate cash against their invoices, allowing them to fund their expansion into new markets. This helped them increase their client base and grow their business while maintaining financial stability.
Construction Company - Improving Financial Stability:
Business: BuildWell Construction
Challenge: BuildWell Construction, a commercial construction company, experienced inconsistent cash flow due to project delays and slow-paying clients.
Solution: BuildWell Construction turned to LVRG Business Funding for accounts receivable factoring.
Benefits: By factoring their accounts receivable, BuildWell Construction stabilized their cash flow, ensuring they had funds available for payroll, materials, and subcontractors. This $4,000,000 A/R facility improved their financial stability and allowed them to take on more projects with confidence.
Unlock Cash Flow with Accounts Receivable Factoring
Are you a business owner looking to improve cash flow and access working capital quickly? Accounts receivable factoring might be the solution you need. This flexible financing option allows you to unlock the value of your accounts receivable and turn them into immediate cash.
How Does Accounts Receivable Factoring Work?
Accounts receivable factoring is a simple and effective way to improve cash flow.
Here's how it works:
Submit Your Invoices: You submit your invoices.
Receive Advance: The factoring company advances you a percentage of the invoice value, typically between 80-98%.
Get Paid: The factoring company collects payment from your customers.
Receive Remaining Balance: Once the invoice is paid, you receive the remaining balance, minus a small fee.
Benefits of Accounts Receivable Financing:
Fast cash flow for businesses working with other businesses
No waiting 30 to 90 days to be paid
Convert accounts receivable into nearly immediate cash
Advances 80%-98% of accounts receivable invoice amount
Accounts receivable management and collections provided
Get Started Today
If you're ready to unlock the cash flow trapped in your accounts receivable, contact us today to learn more about how accounts receivable factoring can benefit your business.
Call (855) 998-5874 or click below to get started.
