Use a Account Receivable
Did you know that America’s small businesses have $825 billion in unpaid invoices? If you own a business, you probably know what it’s like to have people owe you money. That’s where accounts receivable financing (also sometimes referring to as factoring) comes in. You can gain quick access to cash by selling your purchase orders or receivables so you can get back to business as usual..
If you need quick access to working capital, accounts receivable financing is an ideal solution.
In addition to the low factor rates, opting for accounts receivable financing saves you all the time you would’ve spent trying to collect on those outstanding debts yourself.
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What is Account Receivable Financing?
Accounts Receivable Financing, is a type of asset-based financing solution that allows business owners to free up unpaid receivables. Upwise advances you cash collateralized by your account receivables, giving you an excellent way to put money back into your business. With A/R financing, you can get a fast advance of about 85% of the value of your receivables.
$100K - $10 Million
Varies Based on When Customer Pays Account Receivable
Under 18 %
As Fast As Same Day
PROS
- No Need to Wait for A/R Payment from Customers
- Based on Credit of the Receivable's Business
- Low Interest Rates
- Account Receivable is used as Collateral
CONS
- Lenthy Paperwork
- Can be Higher Fees than Other Traditional Financing
- A/R must be from good/big companies
- Fees are based on time it will take for A/R to be paid
Who Qualifies for a Account Receivable Financing?
Any business with a business-to-business model can qualify for A/R factoring, as long as they currently have outstanding receivables.
Here’s the deal.
These lenders don’t care as much about your revenue, profitability, or time in business.
Since your account receivables will act as the loan’s collateral, lenders just want to make sure the invoices make sense for them to finance. The rest of your business isn’t too important.
The maximum amount you can qualify for depends on the total amount and quality of your invoices, as well as on your creditworthiness.
It is important to note that some accounts receivable financing lenders take a look at your credit report, too.
Most Customers Who were approved for an Account Receivable Financing had:
**Based on Previous Upwise Clients
Over $200K
Over 600+
Greather than 1 Year
From Quality & Credible Clients
What does Account Receivable Financing Cost?
As we’ve mentioned, invoice financing can be an expensive way to receive funding for your business. But it’s essentially the cost of having cash on hand now, instead of later.
Here’s a snapshot into what the cost structure would look like.
Financing & Fees of Accounts Receivable Financing
Let’s say you have a $100K invoice with 30-day terms.
A financing company might immediately advance you 85% of that amount—$85K—and hold $15K in reserve.
Your customer then pays that invoice 2 weeks later. After subtracting the 3% processing fee of $3K, the financing company keeps its factoring fee—1% per week, which in this example is 2% or $2K—and gives you the $10K left over.
Why is Account Receivable Factoring Worth the Cost?
You might be feeling like $5K is a steep price to pay—but that all depends on your business’s financials.
If you needed money to make payroll a week after sending out that invoice, then your accounts receivable financing fees don’t seem too bad after all.
If you have an invoice, that is NET 30, 60 or even 90 days – getting funds immediately could be well worth the cost.
Your business’s financial situation might seriously benefit from extra cash flow—so capital right away could definitely outweigh the negative of those fees.
Are you Interested? Don’t wait and Apply now!
Upwise Capital offers a few Account Receivable Products to help your business grow.
be Prepared
Documents Required for Account Receivable Financing
The best strategy to follow before you apply for these loans is to be prepared. The more readily available your documentation is, the faster you’ll move through the process.
The following is a checklist of the most commonly collected documents. It can be very helpful to work with your accountant or tax preparer to gather some of the financial documentation.
We require at least 6 months of your business bank statements. If showing more gives us a better picture on how your business performs, feel free to send us a full year of statements. You may have more than one business bank account, so please make sure to include these statements for each account.
Also known as an “Income Statement,” a Profit and Loss Statement measures a company's financial performance over a specific period of time. This statement includes all revenue and expenses over a given period.
This statement provides an overall financial snapshot of your small business. As an equation, it looks like: Assets = Liabilities + Equity. The two sides of the equation must balance out to equal each other.
In this case the collateral used here is your Account Receivables. We will require an Aging A/R Report showing the account receivables owed to your company over the next 90 days.
To ensure all of your information is correct on the contracts, we require a clear copy of you DL & VC to verify this information.
These can include entity and location documents such as business licenses, Articles of Incorporation, commercial leases, personal and business tax returns or franchise agreements.
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