Tips for Determining if Your Business Qualifies for Accounts Receivable Factoring

When it comes to growing and operating your business, there is often one thing that stands in the way: having enough cash available to meet your current obligations while planning for the future. If your business is, or has been, strapped for cash, accounts receivable factoring companies might be able to help you get the money you need. Here are some tips to find out if your business could qualify for this type of financing.

Companies that Can Benefit from Financing Receivables

Just about any company that has a large amount of outstanding accounts receivable invoices can benefit from this type of financing, but there are some specific factors that make it even more important. These might include:

  • A plan for immediate growth
  • Short-term cash needs that can’t wait for traditional loan review and approval
  • Companies that have a long payment cycle from invoice to receipt
  • Small and medium-size businesses with strong revenues but limited working capital
  • B2B companies that are billing other companies, not individual consumers

Determining if Your Accounts Would Qualify

When your company sells receivables to a third party, that company will often take over the accounts payable process. Part of this process often includes checking your customers’ creditworthiness to determine the factoring company’s likelihood of being able to collect on the debt. Invoices for customers with poor credit will likely involve higher fees, which means less cash for you. However, Universal Funding looks at your entire portfolio to assess a rate to be applied to all invoices, rather than an adjustable rate. This also makes your business aware of your customers to keep an eye on. Before you determine which accounts to sell, Universal Funding will help to assess the credit and risk of those customers.

Calculate Your Return on Investment

Financing receivables doesn’t make sense for every business, and before you turn to this method to generate cash for your company, make sure that it provides you with a solid return on investment. Identify which accounts will be most beneficial to get immediate cash payments so you can increase profits and build a solid cash conversion cycle for your business.

When your business is looking for ways to generate more cash without going through the traditional process of a bank loan, factoring can be a great option. Find out more about it from Universal Funding by filling out our online rate form or calling us today.