Receivable Management Services Can Help Small Businesses

Receivable Management Services Can Help Small Businesses

For small businesses, managing their cash flow can be quite a challenge. Offering terms of credit to their customers is important, but at the same time, it means that they will face a shortage in funds to finance future growth if there is a delay in receiving payments from their debtors. This is where receivable financing can help.

What is receivable financing?Also referred to as account receivable financing or receivables factoring, this is an arrangement between the small business and a lender whereby the account receivables of the company can be used as collateral against which small businesses can get loans to finance their working capital requirements.

What are its advantages?For a small business, often getting loans to finance their future expansion plans or to meet rising customer demand can be difficult as they do not have the same credit history or muscle as larger companies with whom they have to compete in the marketplace. Therefore, having an option of getting finance against their accounts receivable is a quick way for their working capital finance to materialize. This means that they do not have to put their dreams of expansion on hold as the finance can be received within a day after the receivables invoices are processed.

In addition, receivables financing takes care of the time spent in debt collection by the small business owner or his employees. Rather than having to make calls repeatedly to their customers to ask for payments, listening to excuses and reasons about why it is delayed, and risking losing their business, they can relax and not be dependent on the payments for financing their business.

Often small businesses are dependent on receiving payment from their debtors to pay off their creditors and if there is a delay in cashing accounts receivable, then they lose out on the 2% discount that creditors offer for payments made within 10 days. Getting finance against receivables can help small businesses pay off their creditors before the 10-day period and make a saving in costs by availing of the discount.

Is it easy to get receivable financing?Getting receivable financing is simple as it does not involve putting together a list of documents such as financial statements and audit reports as is the case for other loans. All that is needed are the receivables invoices, which when generated can result in the small business getting its finance within 24 hours. Bernard Linney and his staff at HomeCoast Capital are ready to talk with you about growing your business.