Is Selling Accounts Receivable Right for Your Business?

Most small and medium-sized businesses find themselves locked out of traditional lines of credit and other financing options, even when they have paying customers and a sound business plan – or, they’ve reached their limit on an existing line of credit. Some reasons why SMBs struggle to secure traditional financing include: 

• Time in business. Banks often won’t approve small and medium businesses for business financing unless they have a proven track record of success — something that doesn’t come for a couple of years, at least. 
  
  
• Time-sensitive business opportunities. Even if you have a solid track record, the process of securing funding from a business bank can take weeks or even months. The opportunity you needed the cash for may have passed by that time. Same goes for even simply raising the limit on your line of credit. It can take weeks to approve a modest credit increase, that’s if you meet the bank’s stringent requirements (and submit a pile of paperwork.)
  
  
• Asset collateral. Some forms of financing require collateral, giving up equity, or long-term commitment. These methods for getting cash flow funding fast can be risky, with convoluted contracts and hidden fees.
  
  

Small businesses need a way to access cash quickly without the stress and long-term commitments associated with traditional credit options.The good news is that today it’s easier than ever for small business owners like you to get the financing they need. How? By selling accounts receivable to a third party.

You might ask yourself, why would I sell my receivables? That’s a fair question. Not every business needs to sell their receivables, but for some companies receivable financing makes sense. The reasons below are just some of the common reasons our clients tell us they choose to sell accounts receivable. Consider them in the context of your own unique situation to make a decision.

1. You need quick and easy financing for rapid growth (or anything else)

The right invoice factoring solution should provide a speedy way to apply for and receive cash. Thanks to AI, automation, and integration with accounting software, FundThrough eliminates the time-consuming paperwork and approval process associated with business loans and other financing options, speeding up your access to working capital. 

2. You need flexibility with no long-term commitments

You tap into cash only when you need it and choose the invoices you want to fund, when you want to fund. Take something you already have – unpaid invoices – and turn it into a tool for cash flow—all without committing to longer-term debt. Just make sure your factoring partner doesn’t require any long-term factoring contracts, or monthly minimum factoring volume.

3. You want funding without debt

Because factoring is not a loan, you aren’t adding any debt expenses to your balance sheet. Additionally, you aren’t giving away any equity in your business, so you remain in complete control of your company with this non-dilutive source of funding.

4. You want to avoid bank financing hassles

To secure a traditional loan or other bank financing for businesses, you’ll have to jump through hoops including a lengthy approval and application process. Banks also require you to have a certain credit rating or credit score in order to qualify for funding. Receivable factoring focuses on the creditworthiness of your customers, and many factoring applications can be completed in just a few minutes online. Getting approval for factoring in a matter of days is just one of the major benefits of factoring compared to applying for bank financing.