When you need financing to manage business while waiting for clients to pay invoices, there are lots of options available. Accounts receivables financing may be a good way to keep operations running smoothly if there is a gap between when you bill clients and when they remit payment. Knowing how the process works can help you decide if it is the best option for your business.
Getting ready: Before you get financing, it is necessary to do some preparatory work to establish the account. This means collecting some information, including your clients’ credit quality, corporate tax records, your receivables aging report, any liens on your receivables, and any relevant information about your business owners.
Selecting clients: Once you have the preparation ready, you will need to select the clients to submit and provide the relevant information to the accounts receivables financing company. The financing company will verify the information with the client as a part of the process.
Getting financing: After verification, the first batch of invoices will be financed by the accounts receivable financing company. Typically, the amount received as advance financing is approximately 80% of the invoice.
Submission of payments: The financing company process payment checks received on invoices or holding electronic payments in a special account. Once the payment is received, the financing company deducts a fee from the client payment and rebates the remaining invoice balance, thereby settling the transaction.
Repeating the process: Lots of companies choose to use accounts receivables financing as an ongoing process with client invoices. If you would like to do that, you must simply continue submitting invoices to the financing company according to your agreed-upon terms.
Whether you need financing to keep operations running smoothly or you want to use it to take your business to the next step, accounts receivables financing may be a good option for your business. With this process, you can have access to the financing you need, even before your clients pay their invoices.