Accounts receivable financing is a financing agreement between a business and a lending company in which a business receives working capital for a portion of its accounts receivable. These types of AR financing agreements can be constructed in various ways, but the most common is as a loan or an asset sale.
A company's accounts receivable are assets equal to the unpaid balances of invoices billed to clients but not yet paid. These receivables are reported on the business's balance sheet as an asset. Thus, accounts receivable are a type of highly liquid assets that financiers and lenders consider for financing.
Many companies in Washington see accounts receivable as a burden because they are expected to be paid but require a process of collections and payment terms that need to be fulfilled before they can be converted into cash. Here is where factoring lenders like 1st Commercial Credit step in to help companies put their receivables to work and exchange them for immediate cash that can be used today.
Instead of waiting weeks or months for invoice payments, factoring allows business owners to obtain an advance on outstanding invoices and use that cash for pressing business needs and expenses right away. Invoice loans are ideal for businesses in Washington with long net terms and ongoing operational costs. It can also help when unexpected expenses come up threatening to halt a company’s growth. These businesses can begin factoring in their invoices as soon as they provide services or goods to creditworthy customers.
The process of financing receivables is commonly known as factoring, and the companies offering these services are called factoring companies. These companies will work with you to structure accounts receivable financing agreements that will fit your business goals and needs.
Factoring companies turn a business’ receivables into immediate, accessible cash while they are waiting for payment from customers. Commonly, there are two types of accounts receivable financing. The first one is a secured borrowing, which involves allowing the company to keep their accounts receivables on their balance sheet and use them as collateral for a loan. The second type is accounts receivable factoring, which involves selling a company's receivables to a factoring company. The receivables are taken off your balance sheet and moved to the factoring company's balance sheet.
The process looks like this:
The quality of the receivables and the length of time it takes to obtain payment will determine the cost of the factoring fee. For example, if payers make payments within one month, the company that factors receivables may charge a 1% fee. In contrast, slow-paying customers who take 60 days or more may cause the factoring fee to be around 2% or 3%.
A factoring company (or accounts receivable factoring) converts invoices sold on credit terms to immediate working capital at a discount. It has become a simple, fast and easy way to access business cash flow. In comparison with a traditional bank loan, a company that factors receivables has a quicker approval process.
1st Commercial Credit is a company that factors receivables, specializes in evaluating accounts receivable and can make a prompt approval decision. The documentation requirements are not as lengthy, and the main requirement is that an applicant has invoices for work or orders that have already been satisfied. It also helps to have creditworthy customers. As long as a business has been in operation, meets revenue requirements, and is free of liens or legal issues, approval is likelier.
Planning and management of cash flow are vital for any trucking company in Washington. Payroll, fuel, truck payments, insurance, maintenance, and taxes are some of the pressing costs trucking companies need to cover each month.
Most of the time, trucking companies have to offer payment terms of 30, 60, or 90 days to customers, which usually means payment won't be received before those terms are over. This situation can cause freight and trucking businesses to struggle while running business operations without a steady income to survive and grow.
Freight factoring is the ideal financial solution for small and large freight and trucking-related businesses. It works by selling outstanding invoices to a freight factoring company at a slight discount. There is no need to sit and wait weeks or months to receive payment when you can exchange your invoices and use our cash immediately.
Receivables financing is now the primary financial option for freight and trucking companies looking to gain immediate access to fast cash. Freight factoring companies can give businesses up to 97% of their unpaid invoices within 24 hours of approval and invoice verification.
You can continue to take care of business operations, and you will not be forced to turn down any contracts. Factoring companies for truckers will help you continue growing your business every day.
A trucking factoring company like 1st Commercial Credit makes freight factoring easy and is happy to offer the flexibility and resources a trucking company needs. Our low, competitive rates and customized lending options give business owners the capability to expand their trucking business, replace and upgrade old equipment, and succeed. We have more than 18 years in business, and we understand how crucial healthy cash flow is to your business success. We have worked hard to have one of the fastest turnaround times for application, approval, and documentation for freight factoring.
1st Commercial Credit offers many cash flow lending options for freight companies and has a network of experts to walk with you along the way. We provide a broad range of financing solutions for businesses of all sizes in many different financial situations. Our main priority is to help you gain access to funding quickly so you can carry on with running a successful business.
Specialized lending companies working with factoring solutions will be more flexible and lenient when it comes to the funding application and approval process. For example, these companies will not focus on a business owner’s credit status because invoice factoring requires no credit checks or a specific length of time in business. The main requirement to qualify for our financial services is to have invoices for orders/services already delivered to creditworthy customers. We know how crucial time is when running a business, and we do not want to have applicants go through a time-consuming and complicated process. 1st Commercial Credit has made all this a fast and straightforward process so you can focus on other aspects of your business strategy.
Many banks and other financial institutions will demand business assets for collateral as a guarantee for approving bank loans. In contrast, a factoring company will take your company’s accounts receivable as collateral to give you access to immediate cash. This is especially advantageous to those newly established businesses or startups who do not have a long credit history, enough collateral to pledge, or want to avoid the bank and its lengthy processes altogether.
You should consider factoring if:
Obtaining credit for a business owner can be a tricky thing yet essential to the well-being of any business operation. Cash flow will slow down when you have slow-paying customers and if sales haven’t caught up to cover the shortage. Many business owners believe their only solution is to go to the bank and ask for a short-term loan or a line of credit, but the bank will demand a lot of paperwork and test your creditworthiness. And if you have a few financial issues anywhere in your credit history, it will become almost impossible to get the cash you need.
The best, safest, and most efficient alternative solution to get around the bank is factoring. This financial solution will get you fast cash, doesn’t need a perfect credit score, and isn’t bothered by your outstanding debt-to-income ratio. Additionally, this alternative will also have a positive effect and even help improve your overall credit score.
Many prominent industries are taking advantage of business equipment leasing and financing programs because they provide more flexibility than bank loans and other financing programs. Once you finish paying off your equipment financing agreement, the asset is yours. You could sell it and gain back a little of your investment to purchase newer and updated equipment. You could also keep it and renew the lease as long as it’s in good working condition.
Purchasing through equipment financing also has some tax benefits that business owners can take advantage of. They can deduct up to the total purchase price of the qualifying equipment in that year, which will reduce your taxable income.
Equipment financing allows business owners in various industries to afford the equipment they desperately need to run a successful operation. Not all businesses can spend hundreds of thousands of dollars on expensive equipment, but they can ensure that they’ll get the equipment needed without depleting all their cash by using a loan or lease.
Here are three of the main sectors we provide equipment financing solutions to:
A farm equipment lease agreement or loan for a farmer can significantly impact the operation’s cash flow and income. It can help them purchase the machinery and equipment needed to improve efficiency. These agribusinesses purchase equipment like tractors, calf feeders, manure spreaders, etc. Farmers usually look to set up seasonal payments when utilizing equipment financing. This allows them to match their equipment purchases with incoming cash flow.
There are many ways you can get ahead of the competition with construction equipment financing. The equipment can be one of your most significant advantages in the construction industry world. Business owners leasing their construction equipment can help avoid the upfront expense of purchasing. In addition, you can replace and update your tools for newer models every few years.
Manufacturers are often an excellent fit for manufacturing equipment leasing because these companies rely on expensive heavy machinery and tools. Keeping up with demand while maintaining low operating costs means you’ll need to regularly maintain, upgrade, and replace equipment. In addition to all the benefits, financing equipment leaves additional cash flow for other essential business expenses such as payroll, marketing, materials, and more.