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Using Accounts Receivable Financing for the Liquidity

By 06.12.20November 29th, 2021No Comments
Business executive smiling in front of a white board with data graphs and post-its stuck to it

When running your business, a cash shortage can be a nightmare. You must pay bills, pay staff and order the goods that keep your business running. What can you let slide if cash comes up short? Even businesses that are performing well and are profitable encounter cash flow difficulties every once in a while. With long payment terms on invoices, your business can be in the green but still not have access to the liquidity needed to keep up with day-to-day activities. When you take on a big order and need to purchase additional supplies, or payroll is coming up and your outstanding invoices still haven’t been paid, where do you turn?

This is where already having a funding partner is key. Traditional lending from banks and “quick-cash” advances for your business create a new bill to be paid every month. The more you need cash; the higher the rates, creating a negative feedback loop of lending that takes profitable businesses far into debt. Merchant Cash Advance firms offer cash in just days, or even hours, with simple paperwork but include frequent payments (sometimes even daily!) and high-interest rates. Often, traditional bank loans are simply too cumbersome to quickly provide for short-term business cash needs.

There is another solution. Accounts receivable financing services allow factoring of receivables, turning customer invoices into the cash you need to run your business. By using accounts receivable financing — also referred to as invoice factoring — you create cash without adding another payment to your liabilities each month. Invoice factoring works by providing your business with most of the value of an invoice (eCapital typically provides more than 90%). The funder, which is the company providing accounts receivable financing, then collects on the invoice for you, saving your company the time and headache of collections calls. Once the invoice is collected, your business receives the remainder of the balance, less fees for the service. By using a funding partner to factor receivables, your business gets the benefit of professional invoicing and collections support services in addition to critical liquidity without any debt.

Quick-cash services want you to stay in debt. Bank lenders see your business as nothing more than a number. When funding your business, you want a partner that understands your unique circumstances and wants to work with you for continued success. The key is working with a firm who not only provides invoice factoring but actively strives to be your partner and customizes its financial solutions to meet your business’s needs.

eCapital Commercial Finance prides itself on building and maintaining close relationships with the companies we partner with. We take the time to understand your business and its unique challenges to recommend and provide the best funding solution for your situation.