If you are currently experiencing financial setbacks, remember that there is a solution to your business problem. And that is not to close down and add loans to your existing flooding debts. You have to be resourceful and think of other ways how you can add funds to your cash account. Ever heard of receivables finance? That’s right, you can use your accounts receivables to get cash and solve your financial struggles.
Receivable financing is a method of getting funds for your business by means of selling your accounts receivable. It is where you find a factor that can buy your accounts for a discounted amount. Most of the time, you will get 90-95% of the total amount of your accounts receivables. You will also spend additional for factoring fees. But, compared to the amount you are going to receive, the discount and fees are worth it to spend.
Working capital, on the other hand, is the money you need t use to survive the day-to-day activities of your business. It can be computed using your current assets and your current liabilities. Let’s not focus on the equation. You need this capital in order to get your business going. So, how can receivables finance help you get your working capital?
First, receivables finance gives you the amount of cash you need. If you are short on cash and you need actual money to buy your inventories or pay your existing liabilities, you can rely on receivable financing. Your accounts receivable will be converted into cash that you can utilize for your everyday business activities.
Also, receivables finance allows you to reduce your current liabilities if that’s the main purpose of your sale. Some debts are not meant to be long overdue. You have to pay your loans in order to get a good credit standing so banks and financial companies can lend you money in the future. With receivables financing, you can now pay your creditors without applying for a new loan. Remember that it’s never a solution to pay a loan for another loan.
Receivables finance serves as your cash cow. Although it is opposed to the substance of your accounts receivables, the method of converting your accounts into cash can be your only way to get a good amount of working capital. It’s really a good thing that factors exist to give you a chance of survival. Without this method, you will only push your business to its limit.