Selective receivables finance is a type of financing that can be used to improve a company’s liquidity. It allows businesses to access the capital they need by borrowing against specific invoices or accounts receivable.
In this blog post, we will discuss 5 things you need to know about selective receivables finance. We will cover what it is, how it works, the benefits of using it and more!
Selective Receivables Finance: The Basics
Selective receivables finance, also known as selective invoice financing, is a type of short-term funding that allows businesses to borrow against specific invoices or accounts receivable. This can be a useful tool for companies that need quick access to capital but may not qualify for traditional financing.
How Does Selective Receivables Finance Work?
Selective receivables finance works by the lender providing funding to the borrower against open and approved accounts receivable. The borrower then uses the funds to pay their bills and expenses. Once the invoices are paid in full by the customer, the lender receives their principle advance amount plus any interest or fees that were accrued.
Benefits of Selective Receivables Finance
There are several benefits that come with using selective receivables finance. Some of these benefits include:
- Quick Access to Capital – With traditional financing, it can take weeks or even months to get approved and receive the funding you need. With selective receivables finance, you can get the funding you need in as little as 24 hours after invoicing your customer.
- Flexible Repayment Terms – Repayment terms with selective receivables finance are flexible since lender is paid when invoice is paid by customer. This can be helpful for companies that have irregular cash flow.
- Flexible Funding Amounts – Unlike traditional loans, selective receivables finance does not rely on past revenue or cash flow. This type of financing is based on the amount of open receivables a business has. This can be helpful for companies that do not have the past cash flow or revenue to support a traditional loan.
The Companies That Benefit Most
Selective receivables finance can be beneficial for a wide variety of companies. Some of the most common types of companies that use selective receivables finance include:
- Startups – Startups often have a hard time qualifying for traditional financing. This is because they typically have no collateral and little to no history of financial success. Selective receivables finance can be a helpful tool for startups that need quick access to capital against open invoices.
- Small Businesses – Small businesses may not have the assets or credit history required to qualify for traditional loans. Selective receivables finance can be a helpful alternative for small businesses that need quick access to capital.
- Companies with Irregular Cash Flow – Companies that have irregular cash flow can benefit from the flexible repayment terms offered by selective receivables finance. This can help companies with improved cashflow during busy seasons.
How We Can Help
At Star Funding, we are dedicated to helping our clients find the best financing solution for their business. We offer a wide variety of financing products, including selective receivables finance, purchase order finance, and asset based lending solutions. Contact us today to learn more about how we can help you!