Financing your invoices could just be the secret cash management tool you need to even out your income and focus on business growth. It was that tool for many businesses before yours, and that should not be a surprise. Invoice-based businesses are at the whims of their customers’ payment plans, so they need tools to provide working capital at regular intervals. Accounts receivable financing not only does that, it also stays off your debt record because the issue is not your ability to pay but your customers’. Application processes can be quite different for invoice financing if you are used to loans and credit lines, so here is how you prepare a winning application package the very first time.
1. Pay Attention To Program Specifics
There are differences from one invoice financing program to another, in terms of what information is needed up front. In the end, most of them wind up requesting the same documents, but some financing providers prefer a bare-bones preapproval process followed by a second round of information verification before the deal is signed. Be ready to handle any requests for financial information, insurance confirmation, or basics about your business license.
You should also take a careful look at whether this is a no-recourse advance or not, as well as the fee structures. Penalties can eat up your backend payment if you choose a program whose fees do not fit your needs, but there are a lot of options when you’re looking for accounts receivable financing.
2. Present Your Invoices and Payment Histories Up Front
The two things you always need to get this form of financing are a pile of invoices and proof your customers pay within a reasonable period of time after billing. The faster they tend to pay, the less the financing winds up costing you. As financing companies learn your business’s patterns and customer payment cycles, they offer more and more up front. Until then, you need to have customers with good payment histories to avoid penalty fees that eat up the remainder payment you should be able to expect after all the invoices are paid.
3. Be Responsive To Requests From the Factor
Accounts receivable financing is one of the fastest forms of small business lending, but it is also a form that requires direct communication between your business and the lender’s representatives at key points in the process. Be ready to take a phone call, send extra records, and return messages promptly if you want to enjoy the shortest path to approval. The lender will work as fast as they can, with most deals done in five to seven days for first-timers, so the rest is up to you.