While Accounts Receivable Financing is associated with a need for cash flow, some people may have misconceptions about what it is and what it is not. Here we take a look at some of those misconceptions and attempt to debunk these myths.
Accounts Receivable Take a Lot of Time to Be Approved
Applying for a bank loan or line of credit is known to be a lengthy and complicated process, and it can take months to receive capital from the bank. Receivables funding is different. After being approved, a business will most likely receive cash within the next few days.
In reality, the cost of AR Financing is extremely competitive among other financing options. This includes most traditional loans, which come with high interest and additional fees. Utilizing factoring to cut cash flow shortages can put businesses in a better financial state.
Accounts Receivables are Only for Large Companies
It has gotten exponentially harder for small to middle market businesses and start-ups to gain capital from traditional avenues. This is because banks are more and more hesitant to loan cash to companies who have little to no history.
These businesses are often faced with the difficulty of finding additional cash to fund their companies, even when business is booming. Accounts receivable financing is fast and reliable, making it a perfect alternative to small to middle market businesses looking for financing.
Only Businesses with Amazing Credit Can Qualify
Businesses with little to no credit are great candidates for AR financing. While factors do look at a business’s credit score, they are not as critical as banks as they are more interested in the creditworthiness of the client’s customers.
Don’t be Worried About Misconceptions
Don’t let misconceptions about receivables keep you from considering factoring. If you have any concerns about receivables, contact us so that we can help you!