It’s common in just about every business. There is a large amount of cash that will come in but has not yet and opportunities are lost. In the past, this simply would have been accepted, but with accounts receivable financing, businesses – small and large – are finding that they don’t have to miss out any longer.
This article will discuss the finer points of A/R financing, as well as how two US businessmen have been able to use it to their advantage both domestically and overseas.
A/R Financing in a Nutshell
Here is how A/R financing works: your customers owe you money, and you need money. Lenders know, particularly if you’ve been in business longer than 2 years, that you are going to collect at least 80-90% of the money you’re due. As a result, they will gladly lend you less than that amount.
For example, let’s say you are the owner of a business that makes paper plates. Your customers include Wal-mart, Family Dollar and other re-sellers. You are owed $600,000 and it has just come to your attention that a competitor is going out of business. He wants to get rid of $750,000 worth of equipment for $100,000 but wants cash up front. This is an incredible opportunity, but you don’t have the money today, and may not have it in the next two weeks, in which time someone else will get it.
This is where A/R financing comes in. You can get the money quickly, then pay it back as soon as your customers settle up with you.
Now, this was a hypothetical. Here is a real instance in which two very notable American businessmen used A/R financing to start an overseas sports franchise. No matter which industry your businesses is related to, you will need professional financial support. Sallyport Commercial Finance founded by a well-known American enterpreneur Doug Foshee can help to build your business with savvy financial strategy.