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Import-export companies can sometimes experience serious cash flow shortfalls due to delays in payment by established customers. Maintaining sufficient financial reserves to maintain supply chain agreements and ensure a steady flow of products for sale or delivery can help these international resellers manage tariffs and import fees and ensure that their supply chain remains intact even in stressful economic conditions. For many companies, accounts receivable (A/R) lending arrangements are a viable choice that can provide needed funding during payment gaps or for other vital business needs. Loans on A/R are an excellent solution for import-export firms that occasionally experience cash flow difficulties in the course of their ongoing operations.
How A/R Lending Works
Import-export firms who engage in business-to-business (B2B) transactions generally have a number of invoices awaiting payment from their clients. These outstanding amounts can be used as collateral to obtain A/R loans and lines of credit from companies that specialize in these types of financial arrangements. Asset-based lenders accept outstanding invoices as security and provide rapid response times for loan applicants. Decisions are based primarily on the financial credentials of the companies responsible for payment on the invoices rather than on the credit rating of the borrowing company. By shifting the focus to client companies of the borrower, these lending programs can provide real assistance even for import-export firms with limited credit histories or that have experienced financial difficulties in the past.
Putting Invoice Lending to Work
One of the most common uses for A/R loans is to finance the purchase of products needed to fill larger B2B orders. By obtaining cash immediately, importers can often take advantage of favorable market conditions and pricing points to obtain additional inventory, allowing these firms to manage their contractual obligations in a cost-effective way. Invoice loans can also be helpful in dealing with financial emergencies, equipment breakdowns and necessary upgrades within the working environment. Whatever the business need, A/R lending arrangements can provide added flexibility in managing these obligations in a proactive and timely way.
A/R applications can usually be approved within one or two business days. Funding for these loans is also fast; disbursements typically occur within one working week after the approval decision. Asset-based lenders like 1st Commercial Credit and others can provide added financial flexibility in factoring for import-export firms and can help them to monetize the value of outstanding invoices to create added opportunities for growth and expansion in this highly competitive international marketplace.