When your customers take one, two or even three months to pay their invoices, it can be hard to keep your business operations going in the meantime. Without a consistent stream of working capital, many businesses have a hard time covering regular costs like inventory and payroll, let alone budgeting for unexpected emergency expenses. When you find yourself in this situation, you may want to consider trying accounts receivable financing, sometimes also called factoring or AR financing. This arrangement, where you sell outstanding invoices to factor companies for an advance on the invoice amounts, can allow you to keep your cash flow steady and bridge the gap until your customers pay. Read on to learn more about how AR financing works and whether it could be a good option for your business.

1. The Application Process is Quicker Than for Bank Loans

If you’re ever tried to apply for conventional bank loans, you know how sometimes, the application process seems to drag out. With AR financing, you won’t have to worry about waiting weeks or months to find out if you’re getting the funding you need. Because it’s considered a transaction and not actually a loan, there’s less documentation required to apply and you can get access to funds quickly, sometimes within a week of applying. If you don’t have the time to wait for a bank loan approval or can’t qualify for conventional loans, factoring can provide an alternative solution.

2. Your Customers’ Credit History Matters More Than Yours

Another barrier some small businesses encounter to securing traditional loans is the requirement to have excellent credit. If your credit history is less than ideal, the good news is that you can still qualify for accounts receivable financing, since factors are usually more interested in your customers’ history of handling credit than yours. This is because they’re the ones who will be paying the invoices, making their trustworthiness more crucial.

3. You Won’t Have To Handle Collections

Another benefit of working with a factor is that it takes some of the burden off of your shoulders. Many factoring companies will handle payment processing and collections for you, for example, allowing you to focus on what you do best.

When you run your own business, having enough working capital could mean the difference between easily covering all your expenses and having a hard time just staying afloat. If you’re in a cash crunch because your customers haven’t paid their invoices yet, you may want to consider accounts receivable financing. It could be the perfect solution to your cash flow problem.