There are many ways to secure the financing your business needs to get started, to maintain daily operations, and to grow your business. Traditional loans can’t always be the answer for some companies, especially startups with no credit history, and businesses with less than ideal credit rating. In such cases, one way to secure funding is through AR factoring.

What is AR Factoring?

In accounts receivable factoring, an alternative lender will purchase your receivables for an amount equal to 80% or more, of the face value of the invoices. Your company would receive immediate cash to be used for any purpose, and the factoring company would then be responsible for collecting the invoice amounts. Your company pays a certain fee for the factoring service, but would have no further responsibility regarding the invoices themselves.

Advantages of AR Factoring

One great thing about AR factoring is that you gain access to cash much more quickly than you would via a traditional loan, in some cases within a day or two. When your business needs immediate cash, this can be a life-saver. Another big advantage of AR factoring is that your company need not have perfect credit history in order to qualify. Because a lender will base approval more on the credit-worthiness of your customers (and their promptness in paying invoices), the credit rating of your business is not quite as important.

Even if one of your customers goes bankrupt, or is unable to pay a large invoice for some other reason, your company can still be protected against having to repay the factoring company through non-recourse credit protection. There are even some scenarios under which companies that have tax liens or other IRS problems can benefit greatly from AR factoring, if you can demonstrate to the IRS how AR factoring will stabilize the solvency of your business.

Who offers AR Factoring?

Many alternative lenders offer this service, and as a business owner, you can do some comparison-shopping to research the best terms for your business. There are some tremendous benefits provided by AR factoring that make it a funding method, which should be seriously considered.

We would be happy to offer you more information on the AAR factoring process, or even begin you on your financing journey. To begin the AR Factoring process reach out to us today! Whether by phone (317) 569-1110 or by email, you can contact us at any time.