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Funding Fundamentals  :  What Is Accounts Receivable Financing?

What is Accounts Receivable (A/R) Factoring?

Accounts receivable (A/R) factoring is often referred to as Invoice Financing or Factoring. This well established form of financing is the selling of accounts receivables, or open invoices, to a third party (sometimes known as a factor) for immediate cash. A valuable option for companies with changing cash needs, accounts receivable financing gives companies immediate cash to manage operations more efficiently, and to help grow their business.

Promotional Capital's Accounts Receivable Factoring program for select industries—including promotional products and printing businesses—is quite unique in that we can also provide Purchase Order ("P.O") Financing, whereby we advance funds that may be required up-front to pay suppliers for your new orders.

Here are some key concepts about the Accounts Receivable Factoring alternative:

  • Accounts Receivable Factoring is a way to fill the gap between when your company delivers a product or service and when your customer pays. Promotional Capital can accelerate a long wait for cash of perhaps as much as 30, 60, 90 days or more into a matter of mere hours.
  • Accounts Receivable Factoring is based primarily on your customer's credit history, not yours. If your company has products or services that it offers to a creditworthy customer, then your business is a good candidate for this type of financing.
  • Accounts Receivable Factoring is a simple, fast method to sustain your business-as-usual relationship with your customers. Your company can continue to provide goods or services to your customers with a set-term payment; but with accounts receivable financing, you no longer have to wait to be paid. By working with Promotional Capital, your company can easily obtain cash advances of 80% or more of the invoice amount. Cash can be obtained within hours and as often as needed.
  • Accounts Receivable Factoring, sometimes referred to as Invoice Financing or Funding, is one of the oldest methods of providing working capital. Dating back as much as 4,000 years, factoring has long been an easy way for businesses to obtain cash in order to cover expenses during periods of growth. It is a very common financing method in American commerce, especially in today's challenging capital markets environment.
  • Invoice Financing is a chance to obtain cash without providing personal collateral or increasing interest expense. Invoice (Accounts Receivable) Factoring is not a loan and does not complicate your balance sheet—there are no penalties or interest accrued. The finance fee is clear and objective; it is based on the size of the invoice, the length of time it takes to collect the payment, and the creditworthiness of your customers.
  • Accounts Receivable Factoring is an opportunity to build your credit. With adequate cash flow, you can fund large orders, use money from financing to clean up your debts as well as pay overhead and salaries. This will improve your credit history with your suppliers and make it easier to obtain credit from vendors and other financial institutions.

By working with Promotional Capital, working capital problems can be solved. This will give you and your company both the time and money to focus on critical success factors—sales, operations and growth.

Let Promotional Capital provide you with a solution to your working capital needs.

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