Open a Second Location with Accounts Receivable Financing
Many small business owners dream of growing their business. Of having enough customers that you need more than one location. Whether you’re looking to grow within your home town or want to open another shop in a faraway city, accounts receivable financing can help you take steps to become more financially secure, which will make your business successful.
Understanding Accounts Receivable Financing
Receivables show up on your financials, even when you don’t have the money in hand. You give your customers grace to pay their bills, but it can hurt your cash flow. With accounts receivable financing, you work with your lender, also called a factor, to receive money from your receivables. The factor advances you a percentage of your invoice, typically 70 to 90 percent. The factor then collects from the customer when the invoice is due. The factor gets their fees and the advance from the payment. If there is any leftover, it pays the business owner the remaining amount.
Benefits to Factoring
When you sell your invoices to a factor, you aren’t taking on more debt. Your business is simply using an asset to bump up your cash flow. Factoring can often be processed in as little as week. It’s much quicker than other types of financing, giving you access to capital quickly. You don’t have to wait for a traditional loan to be processed. The paperwork is minimal. Plus, the factor is more concerned with your customer’s ability to pay, rather your personal credit score.
Is Accounts Receivable Financing for You?
Before you start using accounts receivable financing to grow your business, you need to have a stable business at one location. If you’re constantly worried about covering your business expenses, you should think about ways to shore up your business to increase revenue.
You’ll need a strong customer base before you start factoring. Your lender wants to work with strong businesses that have customers who pay on time. You should also have a strong team of people working with you. The people who deal with your customers will need to know how to explain your reasons behind factoring. There are many myths about factoring that could make your business seem less secure than it is.
Are You Ready for a Second Location?
Accounts receivable financing can help you grow your business, but you have to consider many factors before you can be sure that you’re really ready to start your chain. Have a strong business plan and model. Know your goals. Work with your lender to find the best financing methods that fit into your business.
