AR Factoring or Accounts Receivable Factoring help small businesses improve their cash flow problems. A company can borrow money against outstanding accounts receivable. By definition of Accounts Receivable Factoring you are selling your accounts receivable to accounts receivable factoring companies for a slight discount.
Businesses can partner with accounts receivable financing to finance all or a portion of their accounts receivable. If you are selling on open terms to credit worthy customers, chances are this type of funding will help you improve your working capital.
In some cases, the factor will even insure your receivables to make sure you get paid in the event of a default from your customer. This is considered Non-Recourse Factoring.
What is AR Factoring?
A/R Factoring lets a company feel comfortable that they will have the cash flow they need to be successful. An entrepreneur who is using Accounts Receivable Factoring can now deliver on larger orders. This is because they no longer have to worry about about waiting 30-90 days to get paid by their customers because the factoring company pays the day you invoice the customer.
Often times, offering better payment terms to customers will also help you land larger deals and bigger purchase orders.
Working with STAR Funding, you can go after the bigger business opportunities and not worry about stressing your cash flow. We are one of the few account receivable factor companies in the factoring industry to provide Non-Recourse Factoring and Purchase Order Funding under the same roof.
In some cases, businesses don’t want to finance all of their open invoices. Select invoice or single invoice factoring is available for your customers that have very good credit. Many factoring companies that are factoring receivables will want to cover all AR to help spread out their risk.
Here are some benefits of AR Factoring
- Improve your cash flow – No more waiting for payments from your customers.
- Secure your customer’s credit – With Non-Recourse AR Factoring you are protected against the credit risk of customers.
- Outsource collections – A good Accounts Receivable Factoring Company will also help you collect on your outstanding AR.
- An inexpensive finance solutions – a/r factoring rates range from 1% – 2.5% per 30 days.
- Operates similar to a line of credit that you can draw on as needed.
There are two main types of invoice factoring.
Non-Recourse Factoring provides you with credit protection against your customers. Regular ar factoring or recourse factoring simply advances you cash against your open accounts receivables from your customers. Simple invoice discounting. Non-Recourse Factoring companies also provide credit guidance. The assurance it provides helps you build stronger relationships with your customers, knowing that you will be paid.
Before engaging with a commercial finance company it is important to understand all of the terms of the agreement. For example, if invoice factoring isn’t right for your company than you may want to consider a line of credit.
Learn more by visiting our Factoring FAQ.