21 Ways to Raise Cash or Restructure Business Debt to Increase Cash Flow

10. Factoring Accounts Receivables

Factoring is the practice of selling your accounts receivables to a factoring company, which will quickly give you a percentage of the money and then, later, collect the full amount due from you or your customer. Factoring companies make their profit on the fees they charge for their services, which start at around 1.5% of the financed receivables.

Factoring gives you instant cash, thus stabilizing your cash flow while reducing overhead. It also relieves your accounts receivables department from having to grant credit or risk larger invoices with clients.

Unlike other types of financing, A/R financing focuses on your sales, not your balance sheet. As sales increase, more working capital becomes available to meet the demands of operating your business. Accounts Receivable Financing provides a continuous, long-term source of funds on a short-term basis.

A/R financing can provide you the funds necessary to pay suppliers early and receive discounts. Because A/R financing is not a loan, no debt is incurred, making it easier to obtain other types of financing.

The types of receivables that are eligible for financing can include both business-to-consumer receivables as well as business-to-business receivables. Some factoring companies may require the goods or services be delivered or completed, and accepted by a U.S.-based customer.

A/R financing is used such industries as:

• Temporary staffing agencies
• Wholesale / Distributors
• Manufacturing companies
• Janitorial maintenance companies
• Limousine companies
• Magazines and related publications
• Security guard agencies
• Printing companies
• Pharmacies
• Hardware stores
• Florists
• Dry cleaners