Accounts Receivables Factoring

Accounts Receivables Factoring

Account receivables factoring to some lenders is equivalent to money in the bank.

Table of Contents - Accounts Receivables Factoring

Accounts receivable factoring is a common practice for companies requiring an alternative finance platform for business stabilization and business growth.

Accounts receivable factoring is designed to assist businesses by immediately increasing their cash flow thus providing immediate capital for everyday business expenses and is often responsible for enhancing business growth. It positions a company favourably such that it can increase production or service offering thereby increasing sales while at the same time meeting everyday business expenses such as payroll, mortgage payments and utilities.

10 Compelling reasons why your Business should consider Accounts Receivable Factoring

When a traditional loan is unattainable quickly

One of the most noted benefits of accounts receivable factoring is the ability of a company to raise cash when a traditional loan is unattainable quickly or not at all. Accounts receivable factoring benefits companies experiencing rapid growth and who require immediate capital to purchase materials, meet payroll, pay vendors, and cover other operating expenses.

Swift way for companies to raise money

A accounts receivable factoring relationship with a lending institution specializing in this service can be done in as little as 24 hours.  This can be extremely beneficial for companies requiring immediate working capital, or those looking to expand their operations quickly. It traditionally takes substantial time and staffing resources for a business to shop around for a loan when turned down by their primary lender. Often audited financial statements are required along with a business plan etc. It can take weeks if not months to hear back from the lending institution whether they are willing to provide a company with the capital it needs today. Businesses often do not have a significant amount of time to capture an opportunity once it presents itself.

Shortens the collections process

Businesses sometimes have to wait for weeks or even months before they are paid for products or services they render. During this time, they might be cash poor and may not have the funds available to grow their businesses or even pay for current operational expenses. Accounts receivable factoring remedies the plague of most businesses, namely late-paying clients.

Allows companies to bring in money without taking on new debt

Debt is often a useful tool used to build and sustain a business. However, debt can also be risky, especially for new companies that are experiencing growth and who are without the capital on hand to pursue this new business. Accounts receivable factoring provides companies with badly needed capital without relying on acquiring new debt.

Can be an excellent option for companies having trouble qualifying for a bank loan

In today's world where computers make all the decisions, getting a business loan is increasingly challenging. With Covid-19 and other factors affecting lending practices, banks were holding on tighter than ever to their money. If a company has not been in business very long or has had problems making loan payments in the past, the likelihood that that business would receive a bank loan is less than favourable. A good alternative, in this case, would be for that company to use an accounts receivable factoring service.

May can help companies that have no collection department or an understaffed one

For small businesses that do not have a collection department or even a collections person, the responsibility to track down late account receivables often rests with the business owner. Business owners should be devoting their time to running and growing their business. A factoring company can provide a business with this much-needed service. Accounts receivable factoring can immediately provide a business with the money they need to survive and thrive by advancing businesses with the money owed them on their invoices and then in turn provide the service of collecting on those account receivables. The seller pays for these services, often for as little as 1.59% of the invoice total, and this is well worth it for most businesses.

Fast payment without collection worries

No business owner wishes to take a customer through the collections process. It results in wasted time and in some instances is not even worth the time and money exerted depending on the amount owed. Accounts receivable factoring of invoices from pre-approved customers is usually funded within 2 business days. No more chasing customers for payment.

Allows business owners to maintain supplier relationships

Accounts receivable factoring programs provide businesses with the capital required to pay their suppliers on time. This increases a business's standing with its key suppliers and assists in negotiating better terms from them.

Reduces the stress of meeting the terms of your most important payables

Accelerated cash flow from accounts receivable financing programs provide businesses with the capital they require covering payrolls, rents or mortgages, taxes and other critical business expenses when due. No business can afford to lose its key employees because it cannot meet payroll. Nor can they expose themselves to the possibility of being evicted or having a mortgage or loan called.

Results in better-paying customers

The best accounts receivable factoring programs often have unique data mining and credit tracking features that provide businesses with a detailed analysis of the credit history and payment habits of their existing customers and their prospects. This information assists businesses in identifying customers that are key to its success and allows management to focus on enhancing those customer relationships.

Who are typical Accounts Receivable Factoring Customers?

  • Fast-growing companies whose past earnings and sales histories do not justify traditional bank loans or revolving lines of credit.
  • Businesses experiencing cash flow shortages due to a slow turnover in accounts receivable.
  • Start-up businesses that have not as yet set up a strong financing relationship with their traditional lending institution.
  • Accounts receivable factoring is especially beneficial for companies with seasonal or uneven sales patterns.
  • Companies whose principals may have bad credit and cannot obtain traditional financing.
  • Companies that have lost their line of credit due to covenant violations.

Types of Businesses that can Benefit from Accounts Receivable Factoring Programs

Businesses from almost every industry and economic sector of the economy can benefit from an accounts receivable factoring program. Examples include but are not limited to:

  • Manufacturing companies
  • Staffing agencies
  • Trucking companies
  • Transportation brokers
  • Technology companies
  • Courier services
  • Security guard companies
  • Resellers
  • Software Companies
  • Call center operators
  • Medical supply companies
  • Insurance adjusters
  • IT consultants
  • Landscaping companies
  • Import companies
  • Office supply companies
  • Distributors & Wholesalers
  • Oil & Gas industry companies
  • Janitorial and cleaning companies
  • And many more….

Simple Process to get Started

Establishing an accounts receivable factoring program for your business is not an arduous process. In most instances, it starts with the submission of a simple application. From there the business will usually be asked to assemble and provide the following information:

  • An accounts receivable ageing report.
  • A customer list with a credit limit request.
  • Two years of Accountant-Prepared financial statements.
  • Copy of articles of Incorporation or Trade Name filing.
  • Copies of Purchase orders or rate confirmation agreements.
  • Copies of sample Invoices to factor.

Top 4 Reason why your Business should choose LendCity Finance for your Account Receivable Factoring needs!

LendCity's account receivable factoring programs are available for both Canadian and US-based companies.

  1. LendCity's accounts receivable factoring programs are available for Canadian and US-based companies.
  2. Accounts receivable factoring rates from LendCity can be as low as 1.59% for 30 days.
  3. LendCity offers accounts receivable factoring lines starting at $10,000 & up to $10 million.
  4. At LendCity we can set up your accounts receivable factoring program within 3 to 5 business days, and in most instances offer 24-hour funding once set up.

How to apply?

Contact LendCity Finance. We will have a quick discussion over the phone with you to assess your needs, then suggest next actions.