There are numerous financing options available for organizations that need funding. Whether you need short-term financing or a long-term structured financing strategy, financial institutions are available to help you meet your company’s financial needs. Along with well-known avenues, such as traditional loans, alternative sources of financing can be attractive to many organizations. Specifically, businesses that may not qualify for traditional loans but who need financing can find what they are looking for from these other sources of funding. One such type of financing is accounts receivable factoring.
Accounts receivable factoring is a way to get financing in exchange for an asset in your business. In this case, the asset is your accounts receivable. Working with a factoring company, you sell your accounts receivable at a discount in order to get the financing you need. These accounts receivable are no longer associated with your company. Instead, clients would provide payment to the factoring company.
Though factoring is not as well known as traditional loans, it has been around for a long time. More recently, it has gained popularity as an alternative to traditional loans, particularly among businesses that may not qualify for loans through banking institutions. This type of financing is often easier to get, since the financial requirements are not as rigorous. It is also attractive because the funds can become available more quickly compared to traditional loan timelines. However, the fees are frequently higher in accounts receivable factoring compared to traditional loans. As a result, most businesses use this as a short-term financing solution rather than a long-term strategy.
If you are looking for a financing option to help meet your organization’s needs and do not qualify for a traditional loan, accounts receivable financing may be a good solution for you. By working with a factoring company, you can get the funding you need to maintain operations as well as meet your company’s goals and objectives.