Time to grow? Time for A/R financing

Accounts receivable financing can help companies get into a financial position where growth is possible.

Time to grow? Time for A/R financing

by Curt Queyrouze, President

Business growth is an exciting prospect for companies across the modern economy. The opportunity to enhance operations, expand into new markets or bring additional clients aboard can present an engaging challenge and provide increased profitability. With a sound plan in place and the necessary funding available, there are few organizations that would hesitate to begin the growth process.

Of course, securing the money required to invest in a new facility, additional staff, more equipment and the many other potential needs related to expansion is a major task in and of itself. How can businesses pay for the improvements necessary to begin expansion? Accounts receivable financing can help companies get into a financial position where growth is possible.

What is A/R financing?

A/R financing draws on an important but sometimes overlooked asset that is likely sitting with your accounts receivable department right now: Unpaid invoices. Although your business has already completed the work or provided the product that led to the creation of these invoices, they're not yet complete. That's frequently due to the long repayment timelines that are common in many industries. Although you're expected to provide a product or service promptly, the same isn't true of the payment provided by customers.

A/R financing takes these unpaid invoices, which can sit in a transitional state for weeks or even months, and converts them into a line of credit your organization can use in just hours or days. The invoices essentially serve as the collateral for the loan, which means you can avoid using critical business assets in that same role. Above minimum limits, you choose how many invoices you use to fund your line of credit, and how frequently to supply them to your lender.

What makes A/R financing a good fit for companies looking to grow?

A/R financing offers a few unique benefits to organizations that want to expand. The most obvious is the ability to turn an existing asset that can't provide an immediate value into something that can. Instead of waiting for invoices to be paid over a relatively long period of time, you can access their financial power all at once. It's common for businesses to plan to spend a significant amount of money on expansion efforts, so tapping into this combined source of funding can be a powerful advantage that helps the expansion process start and finish more quickly.

The lack of a need to use key operational equipment and assets as collateral is another notable benefit of A/R financing. Expansion isn't a sure thing, and even the most detailed and carefully developed growth plans may not accurately reflect reality. When it takes longer than expected to start generating increased income or the process of purchasing or building a new facility hits an unpredictable snag, the last thing business owners want to worry about is potentially losing the equipment or real estate they use on a daily basis. By funding A/R financing's line of credit with invoices, you avoid this source of anxiety and uncertainty.

Additionally, A/R financing is an especially flexible form of credit. It allows you to increase the amount of available credit by passing along additional invoices to your lender and makes sure the funds for finishing a project or getting that last piece of necessary equipment are quickly available. Conversely, there's no need to increase the credit line if your business doesn't have a pressing need to do so. The ease with which you can increase or maintain your line of credit makes the growth process that much simpler to navigate.

Finding a great A/R financing partner

Many lenders provide A/R financing, but there's more to finding a great partner than just that one quality. TAB Bank is proud to offer personalized attention from a dedicated relationship manager, streamlined digital business and banking tools, credit analysis and collections management and much more. To learn more about the benefits of funding your business's growth through A/R financing from TAB Bank, get in touch with us today.

About the Author

Curt Queyrouze

Prior to joining TAB Bank, Mr. Queyrouze amassed over 30 years of commercial finance and commercial banking experience. His career has included various credit, sales, and portfolio management positions in asset-based lending, factoring, corporate banking, oil and gas finance, real estate lending, financial institutions, healthcare finance, and middle marketing lending. Previous roles include Senior Vice President/Director of Loss Mitigation for Whitney Bank where he managed the resolution of a multi-billion dollar problem loan portfolio. He has also previously served as Division Credit Executive for PNC Business Credit and as Chief Operating Officer of The Receivable Exchange, playing a critical role in the launch of this internet-based, factoring auction platform.

Mr. Queyrouze holds a Bachelor of Science degree in Accounting from Louisiana State University. He has also taught many classes on financial analysis, cash flow analysis, loan structuring, and workout strategies. He has served in many volunteer leadership positions for non-profit organizations advocating arts and humanities and disease awareness and prevention. As President, Mr. Queyrouze oversees all strategic, financial, credit, and operational functions of the bank.

Follow on Twitter Follow on Linkedin More Content by Curt Queyrouze
Previous Article
What treasury management means for your business
What treasury management means for your business

Deeply understanding the purpose and practice of treasury management is a critical first step when consider...

Next Article
What you need in an accounting partner
What you need in an accounting partner

Finding the right accounting partner can be a long, time-consuming proposition for small-business owners. U...