Accounts Receivable Financing
If your company needs immediate access to liquid finances, a traditional loan might not be the best option. In fact, it may not even be a viable solution. However, one way to still get funded is through accounts receivable financing.
What is Receivable Financing?
Accounts receivable financing (AR finance) is a loan secured by receivables. This type of loan structure is also referred to as a ledger line of credit or invoice financing. It can be a short-term interim solution to maintaining operations when a traditional loan isn’t accessible.
Whether your company is weathering a rough patch due, delayed payments on invoices, an economic downturn, or you need an injection of cash flow to handle seasonal demands, accounts receivable loans provide an excellent opportunity to support your company during these times.
With an account receivable backed loan, you can capitalize on sudden business opportunities, expand your talent pool, or remedy short-term receivable financing problems. By choosing L3 Funding’s accounts receivable financing plan, you can also grow your company, expand your product line, and secure better vendor deals, all without having to forsake equity in your company.
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"Our distributors were charging us premiums because we didn't have the money to pay for our inventory in advance. L3 arranged a merchant cash advance within days and we were able to capitalize on huge discounts available to much larger businesses. We've never looked back since and consider L3 a long tern partner."
Chad, Spokane, WA
$155,000
Total Funding Deposited
4 hours
Time to funding
"Our oven stopped working right before our busy tourist season and our bank denied our loan request. L3 Funding was able to get us the cash we needed in a couple of days and we were back in business in time to handle the rush of customers. L3 has been an awesome partner and they really provide peace of mind."
Alex, Myrtle Beach, SC
$75,000
Total Funding Deposited
24 hours
Time to funding
"We were rapidly scaling but our customers would take too long to pay our invoices. We had to choose between growth or stability. Our bank wouldn't even consider our special circumstances and denied our credit line outright. The financing with L3 Funding opened up our cash flow and helped us expand a lot faster than we ever could alone."
Justin, Austin, TX
$48,000
Total Funding Deposited
48 hours
Time to funding
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Understanding Accounts Receivable Financing
Accounts receivable financing is a form of loan structure that is based on your company’s accounts receivables. An account receivable is essentially an outstanding invoice owed to your company from a client that has yet to pay in part or in full. When balancing a company’s books, accounts receivable, or invoiced balances, are classified as an asset and can be appealing to lenders.
However, under normal circumstances, accounts receivables are considered a hindrance to business owners as the funds must be obtained from the debtor and aren’t readily available. As many accounts receivable are notated in the ledger as having a year to be paid, converting the theoretical funds into actual liquid cash makes accounts receivable financing an attractive choice for companies in need.
Is Accounts Receivable Financing The Right Solution For Your Business?
There are many benefits of a working capital loan, including:
Accounts receivable financing is an excellent option for companies that need funds immediately. As the market has its windfalls and shortcomings, leverage your accounts receivable, to exploit a commercial opportunity or keep your head afloat during a down season. Accounts receivable financing may be the right solution for your company if it has:
Delinquent Clients: Your company is facing a market crisis and many debtors are delinquent in paying your invoice.
Unexpected Emergency Expenditures: Unexpected events can hit businesses at any moment. Whether it's a natural disaster or a lawsuit, you might be in dire straits and need immediate funding. Whatever the cause, most emergency expenses will extend beyond the scope of what you’ve planned for, and accounts receivable financing can provide you a safety net.
A Unique Business Opportunity: Just like emergencies can’t be thoroughly planned for and unexpectedly arise, so do business opportunities. It can be frustrating to have an opportunity to grow and expand your business, but not have the cash flow to execute it. However, with accounts receivable financing, you can use your current business’s standing to develop the new project.
What are the 3 Types of Receivables Finance?
Listed below are some accounts receivable financing examples and categories:
Asset-Based Lending: Asset-based lending, which is sometimes known as a business line of credit or traditional commercial lending, is an on-balance sheet (as the loan is considered an asset) technique. This type of lending issues a loan based on the value of your company’s accounts receivables.
Traditional Factoring: Through traditional factoring, your company sells its invoiced account receivables to a third-party financial institution. Your business is then given immediate access to a source of funds. However, most institutions will buy your accounts receivable at a discount. The benefit of traditional factoring over asset-based lending is that you have more control over which accounts receivables you are willing to part with.
Selective Receivables Finance: Selective receivables finance is another off-balance sheet technique that allows you to choose which of your company’s receivables to advance for early payment. Because it’s kept off the books, your company’s debt ratio isn’t affected. Similar to traditional factoring, you assign selected account receivables to be sold at a discount in order to have access to liquid funds.
Choosing selective receivable financing allows your company to secure funding without impacting client relationships.
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Need funds to either grow your company or bridge the gap between payments? L3 Funding is your resource.
By choosing L3 Funding our team of experts will help you find the best funding solutions for your business. Apply online today!
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