New York, NY (PRWEB) May 13, 2013
Account Receivable Financing is a type of secured loan in which accounts receivable are pledged as a collateral in exchange for cash. The process involves the purchase of the face value of a company's accounts receivables or invoices by a factoring company at a small discount in exchange for an immediate cash advance. The loan is repaid within a specified period of time.
Accounts Receivable Financing is most often used by businesses that are not able to get a Conventional Bank Financing with a short-term cash flow problem, but can be utilized as an interim solution by an entity with an inadequate credit.
When approved, these transactions are off balance sheets and do not create any company's liability. Each purchase of an invoice, when paid by the customer, is a completed financial transaction.
Factoring of Accounts Receivable brings companies an opportunity to secure short-term working capital and therefore getting them in a better position to secure a banking relationship for startups, distressed or reorganized companies.
Rates for the Account Receivable Financing are usually determined by risk, duration and volume of the transaction. Higher risk, shorter term of agreement and lower dollar amount dictate more expensive terms. There is always a possibility to get a single invoice funded. Any accounts receivable over 90 days might be not financeable, or financeable at the greater discount.
There are numerous players In the Account Receivable Financing Industry. Most of them are generalists and have no industry preference, some have a very narrow specialty dealing, with only for example medical or construction receivables.
Benefits of Account Receivable Financing
1. Quicker Funding
Accounts Receivable Financing provides a company with an immediate opportunity of converting credit sales into immediate cash flow for the business. By getting outstanding invoices or receivables monetized, company is able to get money in the quickest way possible and gain immediate access to working capital for the business.
2. No Equity Dilution
Unlike Mezzanine or Venture Capital, funding of Accounts Receivable does not require the relinquishment of the company's equity.
3. Saving time and effort
A relatively easy access to a working capital frees up the time and effort. The time that has been spent on collecting payment from any unsympathetic clients now can be devoted to building the business.
4. User friendly
Setting up an Accounts Receivable Financing does not take more than just a few days. No debt is created, financing line grows with sales, interest paid only on the funds borrowed.
Accounts Receivable Financing can be arranged confidentially, so that any company's partners unaware that the business is borrowing against sales invoices before payment is received.
Drawbacks of Account Receivable Financing
1. Account Receivable Financing is more expensive form of financing compared to an overdraft or bank loan.
2. As the lender takes a legal charge over the sales ledger, the business has fewer assets available to use as collateral for other forms of lending, making them more expensive or difficult.
3. Sometime it becomes difficult to leave as the business becomes reliant on the improved cash flow.
Before coming to the Universal Business Structured Solution for an Account Receivable Financing please take into consideration the following:
Universal Business Structured Solution might be able to turn accounts receivable into immediate cash within 24 hours! If a company is newly formed or balance sheet is inadequate, a bank may say "no" to this company's borrowing needs. In most cases, Universal Business Structured Solution can say "yes" to solving the company's cash flow problems.
The decisions are based on the strength of the company's customers rather than on the financial strength of the business, regardless of a company's credit history or lack of operating history.
Universal Business Structured Solution can help companies that are start-ups, losing money, in a distressed or even bankruptcy situation, because accounts receivable financing is based only on the customer's credit.
Universal Business Structured Solution is equipped with specialized knowledge of the marketplace. By examining every aspect of our client’s business UB Solution is able to engineer affordable financing quickly and efficiently.
Feel free to contact Universal Business Structured Solution for more information regarding our services or for an initial consultation and evaluation:
Yury Iofe, Managing Partner, MBA
Universal Business Structured Solution
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