Businesses are looking inward for sustainable business funding. As banks raise interest rates on loans, business owners across all industries are trying to think of ways to avoid debt-based financing while still building up capital reserves. As a solution, savvy entrepreneurs have started leveraging assets for continued funding.
Not All Assets Are Equal
Every business has assets, but not all can be used for further financing. Often times, assets such as vehicles, equipment, and even facilities are leased from another company. Businesses do not technically own those assets, and therefore can used their inherent value to create a source of capital. Receivables, on the other hand, are owned assets and can be used to create a renewable source of capital without the burden of debt, while simultaneously improving cash flow.
Receivables typically have an aging period that ranges from 30 to 120 days before payment is due. The lag created by the waiting period can place a strain on finances. Businesses periodically find themselves spending more compared to the amount of revenue coming in from customers. In previous years, businesses would turn to short-term loans to bridge the gap in capital. Unfortunately, taking out loans also meant that a portion of revenue would go to paying off the debt. By leveraging receivables, businesses can sidestep the waiting period and get access to immediate capital without debt.
How It Works
Accounts receivable financing is a simple transaction in which unpaid invoices are exchanged for capital. Instead of waiting for the duration of the 30-plus days to receive revenue, businesses can convert unpaid invoices to capital within a single business day. Because this method is considered a “sale” which used receivables as collateral, there is no debt. Leveraging assets with programs such as accounts receivable financing ensures a healthy cash flow and allows businesses to accumulate capital for growth projects. Additionally, accounts receivable financing reduces the need to debt-based funding, which preserves credit scores and gives small businesses a financial advantage.
FSW Funding helps businesses looking to move away from traditional loans while improving cash flow. Contact our offices today to learn more about expediting access to revenue through accounts receivable financing.