Using Accounts Receivable Funding: When to Apply

When can you company use accounts receivable funding to help the company meet its financial obligations? While not every company will qualify for this type of financing, a large majority of them will as long as there are consistent orders coming in. If you are running a small business or are having trouble making ends meet, is accounts receivable funding right for your company?

How Much Money Does Your Company Bring In?

A factoring company is not going to want to help if there isn't enough revenue coming in. This is because your accounts receivable are going to be used as collateral to secure the advance funding. In most cases, you are going to be charged a fee of up to 15 percent of the total value of the order that you are using as collateral. Therefore, there should be enough of a profit left over after the advance has been granted to satisfy both your company and the factoring company.

Does Your Company Have Good Credit?

While the credit score of a company isn't as important for a secured loan, it does matter to a certain extent. It is also important that your customers have good credit as well. If there is a chance that your customers won't pay, there is a chance that the account receivable advance will not be repaid. Therefore, a company that uses such a loan should have a track record of paying its bills as well as receiving payment from customers.

Most Loans Are Made to Established Companies

Many account receivable advances are given to companies that have been in existence for at least a year or two. It is important that a company has a history of doing business and shows signs of growth. However, this doesn't mean that your company should shy away from asking for the money. If the company secures a big order right away or has a lot of initial capital reserves to further secure a loan, it may be possible to get such a loan even if the company has not been around for more than a few months.

It is important that your company has access to the money it needs to keep growing. An accounts receivable advance from a company such as AFN could be exactly what your business needs to go from merely making ends meet to become a thriving company that is a major player in its industry.