Why Accounts Receivable Financing is a Great Alternative to Business Loans

By: Ryan Attelle

AR financing is a very useful tool for businesses that want to grow by offering a way to gain access to there accounts receivable before customers actually pay there invoices.
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Businesses need to be flexible in the current market place, that's just how it is. If they can not be they probably will not survive. There are a lot of problems that business owners have to face. The most prevalent of which is that fact that banks are currently denying over 65% of the bank loans applied for. It doesn't take a genius to conclude that the banks are probably not the best place to turn for your businesses financial needs, especially small businesses.

A lot of conditions contribute to the fact that many small businesses are showing very slow cash flow on there books. This is something banks don't like to see and a major reason to why they don't want to lend. And being that cash flow is the life blood of a small business they will have to look for alternative sources for the capital they need. The good news is there are a lot of alternative financing sources to business loans in existence today.

Lets start by looking at asset based lending. Business owners need to figure out what kinds of assets the business has to borrow against. In this it is important to understand the status of your receivables. Accounts receivables in short is the time from when you actually sell a product of service to a customer or client to when that person actually pays you for it. Credit limits are set on asset based credit and are limited depending on the scale of the average accounts receivable a business has. A line of credit based on a businesses assets differs in that it is what is called a revolving credit limit. It fluctuates in accordance with a businesses monthly receivable balances on a continuing basis. So essentially you can borrow against the money that customers still owe you.

Businesses need the cash to grow, so that they are able to hire new employees, invest back into the business and expand. This also affords them the opportunity to do research and development, come out with new products and services and ultimately making more money and achieving there goals.

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