Growth-focused businesses need extra capital wherever they can get it. For many business owners, this once meant taking out traditional bank loans in order to take their operations to the next level of development. The drawback to that method is that it means taking on large amounts of debt, which is counter-productive, especially when a business wants to reap the rewards of growth, rather than struggle to break even and pay off loans. What many business owners overlook is an internal source of capital which offers the ability to rack up growth capital in short order: monetizing receivables.
An Overview of Monetizing Receivables
Monetizing receivables involves an agreement with a third party (usually a commercial finance company) that offers factoring or AR financing services. With this agreement, businesses can “sell” their unpaid customer invoices in return for working capital. The only cost involved is a small administrative fee. Agreements can be arranged in about 48 hours. Once in place, any unpaid invoices submitted to the finance company are converted to available money in 24 hours.
Are There Limitations On Monetizing Receivables?
Unpaid customer invoices can be submitted to the partnered finance company in large batches, or individually as they are generated. Most businesses initially submit large batches to clear up any and all outstanding customer balances, and then start submitting individual invoices, just to streamline the accounting process. The only time there are limitations on monetizing receivables is if there is a customer with a bad history of not paying bills on time or poor credit, in which case the financing company will work with your business to devise a solution.
Growing Your Business
By monetizing receivables and getting instant access to working capital, business owners can enjoy an influx of revenue, rather than waiting on aging windows for staggered payments. This allows businesses to cover overhead expenses, and use the leftover amount for growth, developing new products and services, obtaining larger facilities, hiring more staff, and completing any large internal projects. Monetizing receivables is a great alternative to bank loans, as the process places no debt on the balance sheet (because it is considered a sale); requires no credit check (so new businesses or companies with challenged credit ratings can easily qualify); and funds are made available without a long processing period.
Monetizing For The long Run
Many businesses develop long-term relationships with commercial finance companies to ensure a fast turnaround on generated invoices, and to keep the accounting process manageable as the business grows. If your business could benefit from monetizing receivables, or you need a source of extra capital without having to resort to traditional bank loans, check out how this form of financing can provide the solution your company needs.