Can Accounts Receivable Financing Help You Open a Second Location?
Once their initial business is running well, owners often contemplate repeating their success in a new location. However, potential problems with cash flow often deter them from attempting this endeavor. It is imperative that your finances remain healthy as you expand your business. Here are some ways that accounts receivable financing can help.
How Accounts Receivable Financing Works
Your business receivables include outstanding invoices and other funds that customers and investors owe your company. Often these slow-paying clients create problems with cash flow. In accounts receivable financing, you partner with a factoring company that takes on the burden of these unpaid receivables. Once the factoring company verifies the creditworthiness of your clients, it pays you 70 to 90 percent of the value of the receivables. When your customers pay their bills, you receive the balance minus the factoring fee.
The Benefits of Accounts Receivable Factoring
Accounts receivable financing gives business owners considering a second location rapid access to capital without the time-consuming trauma of obtaining a loan from traditional sources. It involves less time, paperwork, stress, and uncertainty. Additionally, the factoring company takes over the collection of outstanding receivables, leaving you more time to focus on new growth.
The Importance of Timing
Before you use accounts receivable financing to open a new location, be sure that your business is ready to move forward in this way. You should be earning steady profits and consistently covering your basic expenses. You should have a secure and reliable customer base. You and your team should also be comfortable with the idea of working with a factoring company and using accounts receivable financing to help fund your expansion. Finally, carefully scrutinize the new location you are considering in terms of financials and operations to ensure that it will function successfully as a unique entity.
For more advice on accounts receivable financing and other aspects of small business finance, contact Anmarc Business Capital.