Accounts Receivable Line Of Credit
Accounts Receivable Line of Credit (AR Line) is for the customer that can manage their cash needs on a daily basis. An AR Line customer will still enjoy the benefits of outsourcing the accounts receivable management. Transfac will purchase invoices and use those invoices as a pool of collateral for a credit line to be drawn upon as needed.
It sounds tricky, but accounts receivable factoring is a simple, popular method of business funding. Traditionally businesses leveraged company equity and assets to secure bank loans. This process can be cumbersome and take a long time - 30 days or more. Because of the long wait for loan approval, companies needed to find another, quicker means of funding. But how could a company circumvent standard time restraints and standard loan amounts? This is where accounts receivable factoring benefits many businesses.
Benefits Accounts Receivable Factoring
- Pass the buck - Well, not actual dollars, just the responsibility of collecting them. When you outsource your accounts receivable to another company, it frees up precious resources and allows your staff to focus on more important matters.
- Work your capital - A lot of companies have capital; it's just tied up in other resources such as inventory or invoices. Getting some free flowing capital will be far more helpful to your business than already allocated capital.
- Quick Cash - To acquire accounts receivable factoring, you won't need an intricate business plan or years worth of tax statements. Usually businesses that get accounts receivable factoring have good customers and a good business, but banks don't like the business's financial ratios.
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