The customers who come through the doors of your business are responsible for a large chunk of your success. Without these individuals taking advantage of your products and services, you wouldn’t be able to keep the proverbial lights on. However, there are also times when your customers can actually prove to be a hindrance to your success. This is especially the case when they are not making payments for completed services in a prompt way. When you find yourself in this position, a financing service like factoring might be able to help you meet the challenges ahead. 

The Problem With Delays

Cash flow is vital for your company’s success. Without access to working capital, you will not be able to cover the many costs that come with keeping your business running. Since your cash flow is predominantly composed of payments you see from clients, it makes sense that delayed payments can easily turn into a major threat to your livelihood. The beauty of accounts receivable financing is that it allows you the ability to take any unpaid invoices in your possession and turn them into cash. This access to capital, in turn, helps you stay on track with your plans.

How AR Financing Works

A service like factoring is not too difficult to understand. Essentially, a lender will take a look at any invoices in your possession that have not yet been paid by clients. The invoices that are approved will be purchased from you, with the lender fronting a percentage of the total value of the invoice. Upon the collection of the full amount from your customer, the lender will then take a fee for the service and provide you with the difference that you are owed. The service is straightforward and fast, allowing business owners access to capital when they need it.

The Pros and Cons

There are advantages and disadvantages to all alternative financing services. With AR financing, the biggest benefit comes in the form of being able to access capital. Falling behind because you have no cash flow can easily cause major, long-term disruptions to your business. On the other side, however, AR financing has some drawbacks. The fee associated with the service can be significant. Before making a final decision on the matter, weigh out all of the costs associated with the service and determine if the fast access to cash is worth the price.

When you’re falling behind due to late payments from your customers, it can be helpful to know where to turn. Look into the specifics surrounding an alternative financing service like factoring and see if it is the right fit for your company’s needs.