Accounts receivable (AR) financing is one of the key services that we provide to our clients. And while it’s not for every business, it can certainly benefit the business owner who wants to turn accounts receivable (invoices) into work capital.

AR Financing Benefits

Here are some of the primary reasons businesses use accounts receivable financing to sustain their growth:

• It generates working capital – The primary purpose of accounts receivable financing is to convert your accounts receivable into capital that you can use for a variety of purposes, such as material / supply purchases. For companies with a lot of capital tied up in their invoices, AR financing can help liquidate that capital.
• It’s a quick path to financing — In most cases, you can secure capital through AR financing / factoring without having to provide as much documentation as you would provide for a traditional small business loan. Thus, it’s a quicker path to much-needed cash flow.
• It lifts a collection burden – When you transfer invoices to a factoring company (which is the most common form of accounts receivable financing), it allows you to refocus your attention on other things that are important to your business. The customers owing the invoices would now send payments to the factoring company that assumed your invoices. So in this regard, accounts receivable financing can reduce some of the collection burden from your company.

Is AR financing right for your business? Well, that depends on several factors. But if you operate accounts receivable as part of your business model, and you need a way to convert some of your invoices into working capital, then accounts receivable financing could be exactly what you need.

If you would like to learn more about the AR financing services of Far West Capital, please contact us at your convenience.

Related articles:

• Factoring Receivables for Cash
• Factoring Companies Explained

The factoring services we provide can serve many different types of businesses. This is part of the reason we had to open two new offices recently, one in El Paso and the other in Richardson, Texas.

The Richardson office will serve the entire Dallas / Fort Worth area, and will be managed by Brian Center (see staff page). Jodie Rodgers will be managing the El Paso office.

With that being said, please keep in mind that we still serve businesses all across the United States. If you operate an accounts receivable type of business model, and you think you could benefit from the working capital finance services we provide, please contact us today!

More company news

Article Summary: An explanation of factoring for small business owners, and how it relates to the current state of the economy.

The financial landscape continues to change in the United States, with tighter credit and lending restrictions spawned by the mortgage breakdown. We have already outlined the history of these changes in our “Ripple Effect” special report (see blog sidebar below). So I won’t belabor that point here.

Instead, I’d like to use this blog post to explain how the economic changes mentioned above have increased the need for alternative financing, such as small business factoring services.

How Factoring Fuels Small Business Growth

By way of definition, factoring is a process through which small business owners can convert accounts receivable (invoices) into much-needed working capital. Thus it is also referred to as invoice factoring for small businesses.

Let’s say I operate a small business that uses an invoicing system to bill clients. At any given time, I have a good deal of capital in the form of outstanding invoices. These invoices represent future revenue, but they do not help me much here in the present.

Now let’s imagine that April is going to be a big month for material / supply purchases, but much of my capital is tied up with invoices. This is a scenario where a small business factoring company can help me transform my invoices into working capital … capital I can put toward those necessary purchases next month.

So as the business owner, I would work with a factoring company to transfer some (or all) of my invoices over to them. The factoring company would advance me a portion of the invoice total — let’s say 80% for this example.

Now I’ve converted 80% of my outstanding invoices into capital I can use to make my supply purchases. My customers who owe the invoices will now send their payments to the factoring company, instead of sending them to me. This is the crux of small business factoring and how it can benefit your growing business.

A Much Needed Tool in Today’s Economy

Our current economic troubles only make this kind of financing all the more important. As federal regulators increase their scrutiny of lenders, the number of financing options for small businesses declines. Thus, there is more need for alternate financing methods such as invoice factoring and other forms of working capital finance.

If you’d like to learn more about this subject, you should check out “The Ripple Effect” — our special report on the state of the economy and how it affects business finance. You can download your copy simply by subscribing to our email newsletter.

If you think small business factoring might be what your company needs, and you would like to learn more about it, please contact us today.

We have created an e-booklet that explains the financial ripple effect that started last year, with the rapid rise of home foreclosures. As you are probably well aware, this still-ongoing crisis spread to the world of business credit as well.

But you may not be aware of how, exactly, the crisis has affected business owners — mainly in terms of limiting finance / credit options for business owners. That’s why we have created this special report, to explain what all of this means to businesses that are actively seeking financing for their continued growth.

An excerpt:

Businesses have fewer options today when seeking financing, thanks largely to the ripple effect we have just discussed. But there are options, and as a modern business owner it’s important that you understand what they are. Most of the “off balance sheet” financing vehicles for banks have all but dried up. Banks that previously could “unload” risk by selling off the loans they made can no longer do so under the same terms, if at all. Thus, they are going to have to make loans the old fashioned way, by underwriting a loan as if it were going to stay on their books.

Get Your Copy Today

This is an electronic publication that comes in PDF format, and you can download your copy today. If you haven’t done so already, just sign up for our working capital newsletter.

Not only will you get useful finance information sent to you by email each month, but you’ll also be able to download The Ripple Effect (our e-booklet) after signing up for the newsletter (a download link will be sent to you automatically after subscribing).