How to Use Accounts Receivable Financing to Help Your Small Business
Smaller businesses are generally more agile when compared to well-established firms. They are able to act a lot more quickly on numerous opportunities required for growth and can discover several ways to enhance the services they deliver to their clients. However, the lack of working capital often makes it harder for these firms to respond to these opportunities.
Most of these businesses turn to accounts receivable financing in order to make sure things run smoothly whenever there is a cash-flow hiccup. Gaps in this positive cash flow can hinder a business’s potential for growth even when the cash-flow is positive in the long run. AR Financing like the one Troy Business Group offers, helps small business owners effectively manage cash-flow in an enhanced manner.
What is Accounts Receivable Financing?
In a nutshell, accounts receivable financing is an arrangement where businesses sell their outstanding customer invoices to a third-party. These sold invoices work just like a cash advance taken from the bank, granting the business owners a payment which is worth most of the invoice value. Once the client pays the invoice’s complete amount, the third-party corporation then issues a payment for the rest of the funds. Most of the accounts receivable financing companies offer these services at a relatively small fees, which makes this kind of financing attractive to several different small business owners who cannot afford the steep fees.
Troy Business Group looks at the credit of the company’s client and not their credit. If the company looking to sell its invoices to us is in business with solid and creditworthy customers, AR Financing through us is an amazing option. Businesses which have IRS issues, customer concentration, start-ups, minority-owned small businesses, and various other perplexing funding and finance situations can benefit a lot through accounts receivable financing.
It is a prerequisite that companies who are looking for accounts receivable financing should be generating $25,000 or more every month for approval. Nevertheless, if the accounts receivable funding bundle creates a condition where they will bring in $25,000, it will qualify them too.
Here are the top 5 ways through which accounts receivable financing can help small businesses:
Smoothing Out the Lumpy Cash-Flow
If a company has some high paying clients; cash-flow will initially be tight and will suddenly spike when this client pays. It can then drop steeply once the company has to pay expenses. As soon as the next invoice is paid, the cash-flow spikes again. To smooth out these “lumps,” there are several B2B companies which use accounts receivable financing. This is most of the time very necessary as mostly an invoice is payable in fifteen to ninety days and most clients choose to wait till the last second to make the payment. These long payment cycles often leave small businesses short on cash for compulsory things such as paying their employees or upgrading their software. Troy Business Group helps businesses with accounts receivable financing which in turn lets small businesses plan very effectively through enhanced cash flow predictability.
Provides Breathing Room in the Business Budget
When a company uses accounts receivable financing, it takes an advance out against their outstanding invoices with Troy Business Group. This provides them with cash which is in the form of advance payment, approximately 85% of the value of their invoices. The remainder is paid to the business once the invoice has been paid. This advance provides breathing room in the small business’s budget to operate whenever there is a short-term imbalance in the cash flow.
Helps Increase the Financial Flexibility
Depending on the kind of small business, the customer demand can wax and wane. For instance, a business which has a strong seasonal component might deal with a huge cash influx throughout the Christmas season, yet have extremely slow cash flow at all other times during the year. Through accounts receivable financing Troy Business Group helps small businesses manage both the busy and lean times by making it extremely easy to ramp their payroll up or down, wherever necessary. It is important that businesses are ever ready for seasonal variations, and accounts receivable management can help ensure they are.
Offers a Quick Access to Working Cash-Flow
Opportunities can sometimes arise very unexpectedly, and if your small business’s cash flow has been slow, you might not have the kind of money which is required to seize these opportunities. However, with Troy Business Group providing accounts receivable financing, you can have access to working capital almost instantaneously. This helps you be ready to grab all the amazing opportunities which can help your small business immensely. Accounts receivable finance also helps eliminate the hassle about checks bouncing or you having to dig into credit.
Provides Employees with More Financial Security
If any business is unable to manage their cash-flow, missing a payroll is highly possible. This missed payroll can pummel your employees’ morale. To help you avoid this, Troy Business Group offer effective accounts receivable financing option through which you can manage your cash-flow which would lead to more secure employees and considerably low turnover. Having the assurance that you have access to accounts receivable finances means that you can focus more on your core business processes and spend less time worrying about the fluctuation in your cash-flow.
Steady cash-flow can sometimes be very unpredictable in the short run, but the outstanding invoices which you have can effectively be used through Troy Business Group to obtain an instant cash advance without having to take debt as you normally would. Using accounts receivable financing you are ever ready to seize unpredicted opportunities, meet all your payrolls and also pay all your expenses without having to worry about your bank balance. Accounts receivable financing can help small businesses stand tall in today’s highly competitive market.