What Sets A/R Financing Apart from Other Forms of Business Lending?

What Sets A/R Financing Apart from Other Forms of Business Lending?

by Trevor Morris, DIrector of Marketing

Accounts receivable financing can help businesses in many different industries attain a more stable cash flow and address a wide variety of needs and opportunities. The move from waiting for clients to pay their invoices to receiving a steady, immediately accessible line of credit using those same invoices as collateral offers some clear benefits. Let’s look at what makes A/R financing different from many other forms of lending and so useful to companies just like yours.

Collateral that’s available and easy to part with

Many types of business loans require businesses to put up a significant amount of collateral. Whether it’s heavy equipment, real estate or the personal property of the business owner, the need for financial institutions to protect their investment through requiring collateral can be discouraging. The prospect of losing the building in which the organization functions or the equipment that makes operations possible isn’t a positive one, even when business owners know they have a strong plan in place for using the loan responsibly and paying it back according to the agreed-upon schedule.

A/R financing sidesteps this issue completely by using a far different type of asset as collateral for the line of credit. Instead of assets that are almost impossible for a company to lose, A/R financing draws on existing unpaid invoices. Your business has already done the work when it comes to selling products or services; it’s just waiting for payment. With A/R financing in place, you can access the value of those invoices immediately instead of waiting as many as 90 days for your client to pay off their debt.

Assuming you can count on your clients to reliably pay their bills, you also benefit from reduced obligations for your A/R specialist or department. Instead of managing that debt, it’s passed along to the financial institution that your business has partnered with, which will collect on the invoice itself. Depending on how your business is structured and the size of your staff, such a change can provide a valuable secondary benefit.

Quick, flexible and responsive funding

Seeking a working capital loan or similar lending option from your bank can be a very positive experience if you have specific plans and goals in mind. A major project or equipment acquisition often requires the dedicated funding such a loan provides. However, slow payment of invoices presents a different sort of problem for many organizations. Acute but repeated issues with shortages of cash are an entirely different beast to contend with than a planned expansion or diversification, and they require a different sort of solution.

The ability to effectively address cash flow problems on an ongoing basis is a major advantage when using A/R financing. As invoices arrive, they’re passed along to the financial institution you partner with and used to strengthen your line of credit. Your company is then in an excellent position to deal with a wide variety of regular costs – from payroll and insurance to purchasing raw materials for the production line – and avoid the hard decisions and lack of resources that can easily come along when many invoices stall in the payment stage. Of course, the money gained through A/R financing can also be set aside for larger initiatives. The flexibility of the funding is yet another advantage your business gains when it adds a dependable, respected financial institution like TAB Bank as a partner.

A unique and powerful solution for your cash flow needs

Whether you can point to specific financial and operational issues caused by waiting for payment on invoices or are simply worried about the potential for them to occur, your business can benefit by choosing TAB Bank as your A/R financing provider. We pride ourselves on a deep understanding of our clients and the effort we put into building a strong, personal relationship with each one. Working with TAB Bank means more than simply securing A/R financing – it gives your company a valuable and trustworthy provider that cares about your company’s success and financial well-being.






The post What Sets A/R Financing Apart from Other Forms of Business Lending? appeared first on TAB Bank.


About the Author

Trevor Morris

Trevor is a skilled, experienced, and passion-filled marketing and communications professional. He brings creativity and innovation to any project, task, or assignment he undertakes. He is able to clearly communicate ideas in any communication setting or communication medium and particularly enjoys opportunities to teach, mentor, and coach. <br><br>Trevor currently serves in the role of Director of Marketing at TAB Bank. TAB Bank is a commercial bank founded in 1998 and located in Ogden, UT. TAB serves the needs of small- to mid-size businesses through accounts receivable financing, asset-based loans, equipment loans, commercial equipment leases, business accounts and card products, and commercial banking services.

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