Every business depends on its accounts receivables for their continuity. Their cash flow is based on the money they collect from the products they have sold or services they have completed. However, if customers fail to pay their bills, getting due receivables can be a problem, especially for small businesses. Fortunately, accounts receivable financing is available to help the business avoid the nightmare. Here are some of the reasons why businesses should sell their receivables.
You Want to Get Instant Cash
Accounts receivable financing provides businesses an instant influx of cash. A financing company like Interstate Capital pays upfront for the receivables they bought and deduct their fee for their service. Interstate Capital speeds up your cash flow through accounts receivable financing. The firm will qualify every sale the company makes and buy the receivables. An increase in sales translates to an increase in cash flow.
You Want to Spare Yourself the Risk
The purchase of your receivables includes inheriting the risk of default. The firm will stay pay you upfront for you receivables; however, in case the customer does not pay his debt, the finance company loses the revenue instead of you. You will find his quite advantageous if sell all your receivables to the firm. Usually, financing firms will qualify customer sales before they buy receivables. But, when they qualify, the firm will have to handle all the risks involved.
You Want to Maintain a Good Credit Rating
As you get the payment for your receivables, you can maintain a stable cash flow. Thus, you can pay your vendors and other creditors promptly. If your receivables are tied up from defaulting or late-paying customers, you may also be paying your dues late because you don’t have a stable cash flow. Being able to pay your bills in a timely manner makes you qualified for discounts. And as your cash flow improves, your balance sheet will have a positive spin. In turn, this can help you in securing a loan and other forms of financing in the future.
You Want to Save Money on Personnel
It takes time to collect accounts receivables. Selling these to a financing company eliminates the need to hire people to do this function. Whenever a business makes a sale, they have to produce an invoice and send this to customers. The firm will then monitor the account to make sure the clients will pay. When your customers don’t pay or make late payments, you will have to send people to collect what you are owed or give them reminders. Selling your receivables leaves this function to the finance company.