It is natural for companies to have a list of debts from their clients. After all, it is a usual part of a business. However, when funds are short, and cash is immediately needed, such debts can be a burden.
To help you secure that deal or purchase the product while it is still on sale, you can opt to deal with factoring agencies through Accounts Receivable (AR) Financing, according to TAB Bank.
Frequently Asked Questions about AR Financing
1. What is AR financing?
Customers to have debts with your company will eventually pay their dues depending on your agreement. While you cannot pressure your clients to pay their debts outside of the agreement, there is a way you can get the money that you need. This is called accounts receivable financing. A factoring company will collect the receipts of debts from your clients. That agency will then give you the amount that you would need depending on the accounts receivables that you presented. However, it is important to note that you will not get 100% of the amount you presented and a fee will be charged for the transaction.
2. What is the role of factoring companies?
Factoring companies evaluate the accounts receivables of a company and decide how much to offer. Obviously, AR owed bigger companies are more valuable than small ones and individual ones. Also, the newer the invoices and the easier it is to collect then the more it is worth. In short, factoring companies are the judge and has the final say on the amount that you would collect.
3. How can AR financing help the company?
AR financing is a good method to get instant cash when your company needs it to close a deal or purchase tools and machinery on sale. This method will get you close to the amount you need, without compromising your finances due to interests like applying for a loan would.
Consider AR financing on your next financial setback and see the difference it makes in your financial situation.