Lawhorn & Associates Mortgage Company, Inc. can arrange for companies to get immediated cash from the outstanding account receivables invoices.
Account receivables financing is a financial practice in which a company borrows against its outstanding accounts receivables, or the money it is owed by its customers for goods or services sold on credit. It is a form of asset-based financing that allows a business to improve its cash flow by converting its unpaid invoices into immediate cash.
The process of accounts receivable financing typically involves a lender, often a bank or a specialized financing company, providing a loan to a business based on the value of its outstanding receivables. The lender usually advances a percentage of the outstanding invoices, typically between 70-90%, and holds the remaining balance as collateral. Once the customer pays the invoice, the lender releases the remaining balance to the borrower, minus any fees or interest charged.
One of the main benefits of accounts receivable financing is that it provides immediate access to cash without the need to wait for customers to pay their outstanding invoices. This can be particularly helpful for businesses with long payment cycles or those that need to fund growth initiatives or capital expenditures.
Another advantage of accounts receivable financing is that it is a flexible form of financing that can be customized to meet the specific needs of a business. Lenders can offer different financing structures, such as factoring or invoice discounting, which can be tailored to the size and industry of the borrower.
Additionally, accounts receivable financing can help a business improve its creditworthiness by reducing the amount of outstanding receivables on its balance sheet. This can result in a better debt-to-equity ratio and increased borrowing capacity.
However, there are also some drawbacks to accounts receivable financing that should be considered before pursuing this option. For example, lenders typically charge higher fees and interest rates than traditional bank loans due to the increased risk associated with lending against unpaid invoices. Additionally, businesses may need to provide extensive documentation and undergo a credit check to qualify for accounts receivable financing.
In conclusion, accounts receivable financing can be a useful tool for businesses that need to improve their cash flow or access capital quickly. However, it is important for businesses to carefully evaluate the costs and benefits of this form of financing and to work with a reputable lender that can provide customized solutions to meet their specific needs.
Contact us for details:
Lawhorn & Associates Mortgage Co.
100 Jefferson St., South, Suite 100B
Huntsville, Al 35801
(256) 539-0555 (office)
(256) 337-3700 (Cell)