When can I use A/R financing to fund my business?

Graphic design image of an unpaid invoice and an arrow pointing to available credit | TAB Bank

by Curtis Sutherland, SVP Accounts Receivable Financing

Business growth is a key consideration for companies across the modern economy. No matter what industry your organization operates in, it will eventually need some form of funding to fuel expansion or diversification.

There are also many situations where even the most carefully operated businesses face cash shortfalls and need a way to quickly bring in funds. With the ability to infuse their organizations with money, business leaders can stabilize operations, maintain business continuity and ensure all obligations are met and potential opportunities are acted upon.

These two reasons, growth and stabilization, are the cause for many companies to seek out reliable sources of financing. One especially effective option, accounts receivable financing, allows enterprises to both stabilize and grow with quick, easily managed and understood access to funds.

What is A/R financing?

The simplest explanation of A/R financing is that it uses existing unpaid invoices sitting in a company's accounts receivable department as the collateral for a line of credit. Many businesses work in industries that have payment cycles that can stretch across many weeks or even months. Organizations that provide goods and services to clients can find themselves without both inventory - or the time and effort invested in completing various forms of work - and payment for significant periods of time. A/R financing allows businesses to significantly reduce the amount of time they spend waiting for payment to arrive.

With a dependable financial institution as a partner and an A/R financing agreement in place, businesses can significantly reduce the timeline associated with receiving money for the goods or services they provide. Because A/R financing serves as a line of credit as opposed to a fixed amount, as is common with loans, companies can use this form of business financing in a variety of ways over time. Companies may choose to commit most or all of their invoices to A/R financing to address major concerns or opportunities. Alternatively, they can use a smaller amount of their invoices as collateral for specific projects and time-sensitive opportunities, where money is needed to act quickly and potentially seize a significant reward.

When can my business use A/R financing?

The current economy moves fast. No matter what industry you're in, time is often of the essence. An inability to act quickly and make effective decisions can hamstring a business and leave it continually attempting to play catch-up with competitors. When your company has fast access to funding - especially when that money comes from an asset you've already sold and are awaiting payment on - it can be that much more agile and make more effective decisions.

A/R financing features short timelines in terms of starting the relationship between financial institutions and businesses, as well as converting invoices into increases in a line of credit. While there are certain qualifications businesses have to meet to participate in an A/R financing program, those that join can expect a quick application process.

With a partnership in place, your business can use A/R financing to address a variety of needs and opportunities. Having access to A/R financing can be a major benefit if your company experiences an unpredictable and severe emergency and needs quick access to funds to stabilize operations. Whether it's a natural disaster that isn't covered by insurance or an evacuation in advance of a major weather event, A/R financing can help your business get back on its feet without having to wait for customers - who may be attempting to recover from a disaster themselves and are similarly delayed - to pay their bills.

Of course, there are many opportunities for growth that come with A/R financing as well. Companies that have an opportunity to secure a lucrative contract but need to expand production capacity or hire more staff can confidently do so with the speedy access to funding A/R financing provides. Businesses that have the chance to expand into a new market or open an additional facility can move forward without as many delays, using A/R financing to fill in the gaps in receiving payment.

Want to learn more about the business lending options TAB Bank has to offer your company? Get in touch with us today!

A/R financing can help your business realize the best financial position possible. To learn more about what we have to offer, check out our dedicated A/R financing page and reach out to us today!  Don't hesitate to also check out our eBook titled, When do you know you need A/R Financing?  Click on the tile below to access this valuable resource.


When do you know you need A/R financing?

About the Author

Curtis Sutherland

Curtis is an accomplished banking executive with over 15 years of commercial banking experience with a focus in structured finance. Areas of expertise include factoring, asset based lending, equipment loans, inventory lending, commercial treasury services, and the uniform commercial code (UCC). History of excelling in a fast-paced growth environment, managing organization change, and attaining superior customer service levels. Ability to leverage technology and human capital to facilitate business excellence and competitive advantage. Experienced in cultivating and maintaining key relationships with clients, executives, shareholders, and strategic partners. <br><br>Curtis has gained invaluable experience while successfully managing a rapidly expanding portfolio through organic growth and company acquisitions. Offer comprehensive credit discipline and business acumen relating to portfolio management during expansionary/contracting economic cycles. Demonstrated ability to recognize competitive opportunities to capitalize on current market conditions. Exceptional sales and marketing skills, along with a proven ability to learn new products, theories, strategies, and tactics – all while retaining the foresight to stay abreast of rapid changes in technology, evolving markets, and industry trends. Extremely well networked with industry professionals, trade organizations, brokers, attorneys, and potential clients. Proven credit discipline and risk mitigation strategies with the lowest loss ratio in the factoring industry.

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