Need quick Bridge Financing capital for a short time?
Maybe you need funds to bridge you to closing on a traditional loan, an equity raise, a sale or to completion of a large project or new piece of business.
If you have accounts receivable on your books, factoring could provide you the cash you need.
A great fit for manufacturers, distributors and a wide range of service businesses such as staffing, trucking or medical practice.
Contact us to learn if your business is a fit for this type of financing.
Accounts receivable factoring can be a valuable form of bridge financing for businesses. Factoring provides several benefits that can help address short-term cash flow needs. Here are some advantages of using accounts receivable factoring as bridge financing:
- Improved Cash Flow: Factoring allows businesses to convert their AR into cash. Instead of waiting for customers to pay invoices, businesses can sell these invoices to a factor and receive funds upfront. This infusion of cash helps improve cash flow, enabling the business to meet immediate financial obligations and fund ongoing operations.
- Quick Access to Funds: Unlike traditional financing that involve lengthy approval processes , factoring provides a straightforward way to obtain funds. Once a factoring agreement is in place, businesses can submit their invoices. The factor sends funds within a short period, typically within a few business days. This speed can be crucial in addressing urgent financial needs and seizing time-sensitive opportunities.
- No Debt Incurred: Factoring is not a loan, so it does not add to the business’s debt burden. Instead, it is a form of asset-based financing where the factoring company purchases the accounts receivable at a discount. As a result, businesses do not accumulate additional debt or have to make regular loan repayments. This can benefit businesses that may have difficulty obtaining traditional loans due to credit issues or limited operating history.
- Flexibility and Scalability: Accounts receivable factoring is a flexible financing solution. It can adapt to the changing needs of a business. The amount of funding available through factoring is tied to the value of the invoices, which means that as sales increase, so does the potential funding. This scalability makes factoring an attractive option for businesses experiencing rapid growth or seasonal fluctuations.
- Outsourcing of AR Management: When using accounts receivable factoring, the factoring company typically takes over the responsibility of collecting payments from customers. This relieves the business of the administrative burden associated with accounts receivable management, such as invoicing, collections, and credit checks. By outsourcing these tasks, businesses can focus on core operations and save time and resources.
- Improved Creditworthiness: As factoring is based on the creditworthiness of the business’s customers rather than its own credit, factoring can help businesses improve their overall financial standing. By ensuring a steady cash flow and timely payments, factoring can enhance a company’s ability to meet financial obligations, pay suppliers, and invest in growth opportunities. Improved creditworthiness can open up additional financing options in the future.
Overall, accounts receivable factoring can provide businesses with a flexible, efficient, and accessible form of bridge financing. It offers immediate cash flow relief and eliminates the need for additional debt. It also allows businesses to focus on growth and operations, making it a valuable tool for bridging short-term financial gaps.