Credit Terms through Receivable Based Financing
A/R Factoring Financing removes the funding burden for not-yet bankable businesses. Companies extend customer credit without securing cash flow financing, causing financial stress. But invoice factoring removes cash flow struggles, mitigates client risk, and enables offering credit terms.
Businesses lacking the credit profile to secure traditional financing need alternative tools to extend customer credit terms. Usually, small businesses, startups, and entrepreneurs without established customer lists are short on cash reserves. Thus, extending payment credit terms allows your customers to pay 30, 60, or 90-days plus after services are rendered. Commercial sales made on credit are usually called payment or credit terms. However, foreign companies with sales into the US can use Bankers Factoring Credit Facilities too.
It is common for business owners to acquire commercial customers who require large lines of credit. So how can small businesses turn away Big Box Retailers promising hundreds of thousands in purchase orders? Nevertheless, if your company struggles to finance operations due to extended credit terms, you should submit an online funding application today. That’s because same Day AR Factor Financing provides the working capital business owners need to support two or three months of business expenses.
This article will cover the following topics that will teach you how to offer payment terms to your customers while also eluding your cash flow issues.
- Defining payment terms?
- How do businesses extend payment terms?
- How to mitigate the risks of offering customer credit terms?
- AR Factoring Financing Facilitates Offering Credit Terms
- Pros of Invoice Factoring
- Are you eligible for invoice factoring?
- Ready to AR Factor Finance and Extend Credit
Defining payment terms?
The payment terms, which are commonly offered in 30 to 90-day periods will provide clients with short-term trade credit. As a result, this term will determine when clients will pay their invoices. Payment terms are often accompanied by a notice dictating the days the client has to pay the invoice. These payment terms are commonly fixed in this format; where the Due in Net N Days and where ‘N’ accounts for the number of days.
Examples of payment terms include:
- Net 30 Days
- Net 45 Days
- Net 60 Days
- Net 90 Days
Learn more in our previous article, “Offer Credit Terms through Invoice Financing.”
How do businesses extend payment terms?
The process of extending payment credit terms consists of three main components:
- Securing financing or working capital to support credit advances
- Qualifying your customer’s line of credit
- Total accounts receivable (AR) management
Not-yet-bankable businesses or businesses with recent bank loan denials struggle to find business financing and lack the cash to support months of overhead. However, invoice factoring financing helps financially distressed companies extend customer credit terms and generate steady cash flow. So contact Bankers Factoring, and our team of credit specialists can develop an AR factoring finance plan today.
Small businesses do not always have the resources to conduct sufficient credit checks on their customers before extending credit terms. And it is typical for small companies to accept purchase orders from large commercial clients with NET60 credit terms. This means that large customers demand extended payment terms but are generally financially healthy. But with a factoring company, like Bankers Factoring, we conduct the credit approval process with our factoring due diligence.
Lastly, the last piece of extending customer credit is collecting the AR invoice or payment. AR management is critical in tight cash flow situations. Small businesses cannot afford customers to pay weeks after their agreed terms. Working with Bankers Factoring, our invoice factoring financing program includes total AR management with 24/7 online reporting. We remove the burden on your accounting team and put time back into your business.
How to mitigate the risks of extending customer credit terms?
Offering payment terms to clients can invoke cash flow shortages for companies, attached to monthly operating expenses, payroll funding, and a lack of cash reserves. For example, it is common for cash flow issues to compound when your payables cycle is quicker than your receivables cycle. Companies can submit an online funding application today if they lack the financing to support offering credit terms.
Securing a factoring line reduces the number of risks clients take on offering credit. Invoice factoring with Bankers Factoring mitigates our client risk in three main ways:
- AR Factoring Financing turns unpaid open invoices into same-day working capital. Invoice factoring relieves the cash flow gaps from offering credit payment terms. Factoring financing provides liquidity for payroll funding and business overhead.
- Bankers Factoring provides non-recourse factoring, meaning we take on the credit risk and offer our clients bad debt protection. Moreover, this means our clients do not lose funding in case of customer insolvency, bankruptcy, or protracted slow pay.
- We provide outsourced credit, and AR management is included in our small fees, starting at .9% per 30-days. Our team of finance professionals qualifies your customers’ credit, and we manage the collections process. We enhance your operating efficiency and allow your team to focus on business development.
Learn more in our previous article, “Extend Credit Terms with Factor Finance.
A/R Factoring Financing Facilitates Offering Credit Terms
Invoice factoring is a valuable solution for small businesses, startups, and growing companies who cannot yet afford to present terms of payments to their clients. Factoring your accounts receivable is more accessible than most financial solutions that are available to not-yet bankable companies. It will help alleviate cash flow issues, allowing you to offer payment terms to your clients.
The two cash installments are standard for factoring in financing transactions. This cash installment means that the first is deposited into your bank account. This first cash payment is done by submitting your invoices to the factoring company. After your clients have satisfied their payment terms, a second deposit will be made to your account. The second payment is less than the factoring fee in order to settle the transaction for your company.
Pros of Invoice Factoring
Invoice factoring has several advantages compared to conventional funding methods, such as:
- Provides steady cash flow, with initial cash advances up to 93%
- Offers to finance payroll funding
- Enables offering payment terms
- Reduces your bad debt
- Easy to obtain compared to traditional financing
- Factoring financing lines grows are your monthly receivables grow
- Quick funding process that takes 3 to 5 days
Are you eligible for invoice factoring?
Invoice factor financing is accessible to small, growing, and startup companies. Other approaches to business financing are not as easy to obtain by most companies. Here are the qualifications required to become eligible:
- Controlled accounting and invoicing practices
- Creditworthy commercial or government customers
- Unencumbered invoices with no liens
- Gross profits above 25%
Ready for A/R Factor Finance and Extend Credit
If your business is extending credit with little to no cash reserves, we can help your funding situation. Stop the bleeding from poor cash flow management and inject the working capital you need to grow your business. AR Factoring Financing removes the funding burden for not-yet bankable businesses.