Accounts Receivable Financing

Accounts receivable financing occurs when a business uses its invoices as collateral for short-term financing.

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OVERVIEW

Accounts receivable financing provides a credit line to the borrowing company based on the borrower's qualified receivables or outstanding invoices. This provides the borrowing company with immediate cash for business operations and growth.

Fundbox offers AR financing up to $100k with advance rates as high as 100%. The discount rate is typically 0.5% - 0.7% per week and the repayment terms are usually 12 - 24 weeks. You can get financed in as little as 24 hours.

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Small Business Financing

How Accounts Receivable Financing Works

Because cash flow problems due to slow-paying invoices affect different companies of all sizes, especially those that do not have enough reserves and those that are growing fast, many companies turn to accounts receivable (AR) financing to help keep their business operational. Accounts receivable companies typically offer the following:

Top AR Financing Companies at a Glance

 
fundbox counts receivable financingFundBox
bluevine counts receivable financingBlueVine
Amount You Can Borrow
$1,000 to $100,000
$20,000 to $2,000,000
Repayment Terms
12 to 24 weeks
1 to 12 weeks
Advance Rate
100%
85% to 90%
Discount Rate
0.5% to 0.7% per week
2.5% to 5% per month
Qualification Requirements
- 6+ months in business
- Must invoice B2B/B2G/B2C customers
- 3+ months in business
- Must invoice B2B or B2G customers
Funding Time
As fast as 1 business day
As fast as 1 business day

The AR financing process is relatively simple:

  • The company creates an online account with AR financing provider and synchronize their accounting software.
  • After the account is set up, the company then selects the outstanding invoices they want to clear and get financed.
  • The provider performs the necessary due diligence to determine the borrowing company's qualifications.
  • Most AR financing providers advance 70% to 100% of the eligible outstanding receivables.
  • The borrowing company will receive the funds in their bank account within 24 to 72 hours.
  • AR financing is typically repaid weekly. The fee varies depending on the AR financing provider and ranges from 1% to 5% monthly.

The funds that companies get from AR financing is often used for the following:

  • To pay for their regular operating expenses such as payroll, rent, and utility bills.
  • To capitalize on the growth of the business like renovations and expansion.
  • For other emergency reasons such as the need to buy new equipment, raw materials, and additional inventory.

Accounts Receivable Financing Qualifications

Accounts receivable financing is available to companies of all sizes. Because the financing is based on the quality of the outstanding invoices, the credit score qualification lies not on the borrowing company but on its customers. There are other factors that need to be considered in order to qualify for accounts receivable financing, such as the following:

  • The required number of years of operation depends on the AR financing provider, but a company needs to be in operation long enough to be able to establish its financial record.
  • The company's customers must have good credit standing and reliable paying history. Background checking on a borrowing company's customers standard practice for approval.
  • The receivables are due in 30 – 60 days. Long outstanding receivables are typically not considered for financing. Although, there are some AR financing providers which accept invoices due up to 90 days.
  • The accounts receivable must be free from liens and encumbrances. AR financing companies only accept clean invoices as collateral.
  • The business has a steady flow of annual revenue. The ideal profit margins for bigger companies is 10% and 15% for smaller companies.
  • The borrowing company and its stakeholders must have a good background.

Accounts Receivable Financing Costs

The best thing about accounts receivable financing is that the borrower is only charged a one-time fee for every invoice being financed. The fee usually ranges from 1% to 5% monthly. This fee is paid as part of the weekly payments. In case the borrower fails to pay on time, the provider may charge a penalty for late payments.

Bottom Line

Generally, all companies need access to credit facilities to meet their day-to-day operating expenses and other needs. For companies in need of a short-term solution for their cash flow necessities, accounts receivable financing is the better option especially when they have steady sales, established revenue, and high-quality invoices.

Fundbox offers AR financing up to $100k with advance rates as high as 100%. The discount rate is typically 0.5% - 0.7% per week and the repayment terms are usually 12 - 24 weeks. You can get financed in as little as 24 hours.

Visit FundBox

The Details:


max-loan-amountMaximum Loan Amount
$2 million


loan-termTypical Loan Term
1 - 24 weeks


interest-ratesTypical Interest Rates
N/A


speedSpeed
As fast as 1 business day



Down-PaymentDown Payment?
N/A


CollateralCollateral
Outstanding invoices


Personal-GuaranteePersonal Guarantee?
N/A

Have a question?

Pros


small business loansEasy to qualify and get approved.

small business loansFast approval and funding.

small business loans

No need for collateral from business or personal assets.

small business loansAbility to choose invoices to finance.

small business loansFreed up working capital.

Cons


small business loansApproval is based on the client's credit standing, not on the company's.

small business loans

Typically requires a higher minimum monthly sales to qualify for, and it may not be ideal for very small companies.

small business loansWeekly payments are often required, which may affect the cash flow, depending on the volume of the company's sales.

How to Apply

how-to-apply1Answer Simple Questions
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how-to-apply2Browse Your Loan Options
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Additional Resources

Understand the difference between business loans and lines of credit
Click here!

Interested in a home equity line of credit or home equity loan?
Click here!

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