Tag: Receivables

Don’t Let Accounts Receivables Sink Your Business

Accounts receivables are a necessary part of many businesses. A lot of potential customers can be lost if you do not allow businesses to pay invoices with net terms, whether 30, 60, or 90 days.  However, you can lose a lot of money if you don’t collect on those receivables.  How do you offer the benefit, without suffering the consequences?

How to Manage the Double Life of Accounts Receivables

Accounts receivables really can lead a double life of sorts. On the one hand, they lure in customers with their appeal.  On the other hand, they can cause major cash gaps simply by their nature. Those gaps can fill with unpaid obligations quickly if there is no bridge over them. 

Bridging the Gap of Accounts Receivables

So, the question becomes, how do you enjoy the benefits without the gaps. The answer is accounts receivable financing. In fact, this answers more than one question.  Not only is it a way to bridge cash gaps, but it is also a way to fast access to cash for other needs.

For example, you may not have an unmanageable cash gap, but rather you need to take advantage of special pricing on a bulk purchase. Maybe you do not want to exhaust your cash on hand, or you do not have the cash on hand. Either way, you can leverage your accounts receivable to finance more than just cash flow issues due to slow collections. 

How Does Accounts Receivables Financing Work?  

Credit Suite can help you get up to $10 million in account receivable financing.  Up to 80% of receivables can be advanced within 24 hours.  Interest rates range from 8% to 12% currently. The minimum credit score requirement is 500, and the receivables must be from another business or government agency, not an individual.  You also have to be in business for at least one year.. In addition to an application, you’ll need to provide a breakdown of existing receivables and a sample invoice.

Find out why so many companies use our proven methods to get business loans.

This is an ideal way to access fast cash for your business for a number of reasons, especially if your credit isn’t the best. Not only that, but the interest rates are much more reasonable than that of most credit 

cards.

Merchant Cash Advance

If you accept credit cards as payment, you have another, similar option to accounts receivables financing. 

It’s called a merchant cash advance.  Our merchant financing program is a good fit for businesses that accept credit cards and need fast, easy financing.  You can get up to $500,000 without collateral and a minimum credit score as low as 500.

You only have to turn over bank statements to prove cash flow.  The lenders we work with do not ask for other documents such as financials, business plans, resumes, or any of the other documents traditional lenders typically ask for.

Just  4-6 months of your bank and merchant account statements is all it takes. They just want to see consistent deposits and annual revenue of $50,000 or higher. Also, you do have to have been in business for 6 months or more.

They will also look to see if there are a lot of Non-Sufficient-Funds showing on your bank statements, or low chargebacks on your merchant statements.  More than 10 deposits in a month going into your bank account is a key positive factors

Lenders want to see that you manage your bank and merchant accounts responsibly and have a fair number of consistent credit card transaction deposits each month.

What if You Do Not Have Accounts Receivables or Accept Credit Cards?

Maybe you don’t have accounts receivable. That may mean you do not have the cash gaps that can come with them, but you might still need cash access anyway.  There are other options. One of the most flexible but least known types of business financing is the Credit Line Hybrid.

A credit line hybrid is unsecured business financing.  It allows you to fund your business without putting up collateral, and you only pay back what you use.

Find out why so many companies use our proven methods to get business loans

Unlike accounts receivables financing, you do need good personal credit to qualify for the Credit Line Hybrid on your own. Your personal credit score should be at least 685.  In addition, you can’t have any liens, judgments, bankruptcies or late payments.  Furthermore, in the past 6 months you should have no more than 4 credit inquiries, and you should have less than a 45% balance on all business and personal credit cards.  It’s also preferred that you have established business credit as well as personal credit.

However, there is a way around those requirements if you don’t meet them. You can take on a credit partner that meets each of these requirements.  Many business owners work with a friend or relative to fund their business.  If a relative or a friend meets all of these requirements, they can partner with you to allow you to tap into their credit to access funding. 

Top Ways to Use Funds from A/R Financing, Merchant Cash Advances,  and The Credit Line Hybrid

The Credit Line Hybrid is an option if you do not have accounts receivable or do not accept credit card payments. However, if you qualify for more than one, you can combine them for even more powerful business funding. 

You can use each one separately or together to do any of the following, and more!

  • Pay off higher interest debt to lower monthly payments.  
  • Bridge a cash gap due to slow collections or seasonal issues. You could never have to worry or stress about large invoices being paid slowly or slow business in the off season ever again.
  • Cover bills during a global pandemic. Can you relate?
  • Purchase inventory in bulk to take advantage of promotional pricing. 
  • Grow and expand your business by adding equipment, adding on to your building, or even opening a new location.
  • Fund updates and repairs. Don’t let the little things, or big things, slide because you can’t pay for it.

Find out why so many companies use our proven methods to get business loans

That said, the Credit Line Hybrid does have one bonus that the accounts receivables funding and merchant cash advance does not.  The Credit Line Hybrid reports to your business credit report, in turn helping you build a stronger business credit score. 

Why Does Your Business Credit Report Matter? 

If you made it here from a quick search about accounts receivables financing, you may be asking yourself what on earth a business credit report has to do with anything. The quick and dirty is, a strong business credit score can increase fundability and allow you to access even more funding for your business. 

Fundability is the overall ability of your business to get funding.  Not sure where you stand or what kind of funding you can get? Try a free consultation.

Accounts Receivables Financing Can Be a Lifeboat for Your Business

Accounts receivables can truly be a blessing or a curse. They are a great tool to help you draw more business. The ability to pay later is a huge benefit, and it can make the difference between a potential customer lost and a new customer.

However, if collections become an issue, the curse can kick in.  Accounts receivables financing is a great way to overcome the curse and keep the blessing. That’s not the only way to use this kind of financing though. 

Your accounts receivables can be leveraged to get funding your business can use to not only survive, but to thrive. If you do not qualify, a merchant cash advance or the Credit Line Hybrid can help as well.  If you qualify for all three, you can get triple the funding to grow even more!

The post Don’t Let Accounts Receivables Sink Your Business appeared first on Credit Suite.

Everything You Need to Know About Accounts Receivables Financing 

… And What to Do for Funding Beyond Accounts Receivables Financing 

Accounts receivables financing is not something that you hear a lot about.  There is a ton of information out there about loans, credit cards, and even lines of credit.  No one really talks about financing your receivables though. That is, until you start trying to figure out how to get cash fast.  If you need fast cash and you have open receivables, then A/R financing may be just what you need.

Don’t confuse accounts receivables financing with accounts receivables selling.  They are two different things used for two different purposes. For example, selling your receivables serves as more of a means of getting older receivables off the books. 

The buyer pays a premium and then tries to collect the full value of the receivable.  The business owner never gets any more money than the original selling price. You get cash fast and you get the receivables off the books. 

Accounts receivable financing is different.  You can do it in a couple of ways. The first is, you can simply use the invoices as security for a loan.  The other, is invoice factoring. This is a mix of selling and financing. In factoring, the factoring company pays you a portion of the value of the invoices.  Then, they collect what they can, hopefully full value. They then keep their set, agreed upon fee, and send you the difference. 

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This means that the amount you get when you first factor the invoices may not be all you get. You will still get the difference in the amount collected less what you have already received and the factoring fee. 

What Are the Benefits of Accounts Receivables Financing?

Accounts receivables financing is not the best choice for every business in every situation, but there are some times when it truly is the best option.  Done correctly, there can be many benefits. For example:

  • Faster, less complicated process than what is typical with other types of financing
  • Accounts receivables financing premiums are often less than the interest rates and fees with traditional financing. 
  • In some cases, it is easier to qualify for A/R financing because lenders look at the quality of your invoices rather than your credit history.  
  • You get your money faster.
  • Accounts receivables financing can happen on an ongoing basis so as to bridge the cash gaps due to slow collections. 

How Do You Qualify for Accounts Receivables Financing? 

While all financing companies have their own qualification requirements, these can give you an idea of the minimum most require to be eligible for accounts receivable financing. 

  • They must, of course, issue invoices to customers
  • There must typically be at least $50,000 in annual revenue 
  • Usually they require that a business has been in operation for at least 6 months
  • Customers must be creditworthy, meaning they are likely to pay their invoices

It is important to remember that, while there are some instances where the financing company will take on the task of collecting on the invoices, the debt is still the responsibility of the business owner receiving the financing. Regardless of who is doing the collecting, if the invoice is not paid, the business owner is still responsible for the debt to the lender. 

Where Can You Get Accounts Receivables Financing?

There are many lenders that offer this service.  Here are just a few. 

1st Commercial Credit

This lender has been around for 15 years.  They offer invoice financing starting at .69% to 1.59% or Prime +2 and an administration fee.  1st Commercial Credit boasts a fast approval process, and they do not require financial statements for financing up to $350,000.  You can set up your accounts receivables financing with them in as little as 3 to 5 days. 

New Century Financial 

New Century Financial offers invoice financing up to 90% of the original invoice.  They claim streamlined, fast processing with no hidden fees. 

Blue Elephant Financing

This company works with businesses that have government contracts.  They offer account receivables financing related to FEMA, HUD, and other government contracts. Blue Elephant Financing prides itself on an easy application process and fast turnaround. 

Capital Plus Construction Services

Capital Plus offers accounts receivables financing related to construction contracts specifically.

Star Funding

accounts receivables financing Credit Suite

This company will not only do accounts receivables financing, but they will also help you collect on open invoices. This is a major plus for a lot of businesses. If you need or want collection help along with financing, Star Funding if for you.  They also offer accounts receivable management services.

Seven Oaks Capital Associates

Seven Oaks also offers general accounts receivables financing services along with collection and management services.  In addition, they can help you obtain credit information on those to whom you extend credit.

Of course there are hundreds of companies out there that offer these services.  These are just a few to get you started. 

A Word About Merchant Cash Advances

If you need a similar option but do not have a ton of open invoices, you might look into getting a merchant cash advance. This is similar to factoring invoices, but it works based on average credit card sales. Basically, you get an advance on your projected credit card sales. 

Here’s how it works.  First, you will submit information about your average daily credit card sales.  Then, the cash advance company will tell you how much you are eligible for based on that average.  

What Else Should You Be Doing? 

Now, the allure for many small businesses is that this type of financing doesn’t require great credit.  In fact, if your invoices are solid, the factoring company may not even do a credit check. If you have bad credit or no credit,  that is a good thing. However, you need to think beyond the right now and consider the future.

Working to build business credit is vital because this type of financing will not work for every need.  

Every Small Business Needs To Establish Business Credit

This is credit in a small business’s name. It doesn’t connect to an entrepreneur’s consumer credit. Here is why you need it: 

  • Since small business credit is distinct from individual, it helps to safeguard an entrepreneur’s personal assets, in the event of court action or business insolvency.
  • With two distinct credit scores, an entrepreneur can get two different cards from the same vendor. This effectively doubles buying power.
  • Even startup companies can do this. Visiting a bank for a business loan can be a recipe for disappointment. But building company credit, when done correctly, is a plan for success.
  • Consumer credit scores depend on payments but also various other elements like credit use percentages. For small business credit, the scores really merely hinge on whether a small business pays its debts punctually.

So where do you start?  How do you establish business credit?  It’s a process that has to be done in the right order.  You have to actually work toward it. It doesn’t happen on its own.

How to Establish Business Credit

Accomplishing the steps out of sequence leads to repetitive denials. No one can start at the top with business credit. For example, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.

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Start with Business Fundability

A small business has to be fundable to credit issuers and vendors. This includes a number of things.  The first, is that a business needs its own phone number and address separate from the owner. They each need to be listed with the directories.  Do that here.  It will also need an EIN.  This is similar to a social security number, only for a business rather than an individual.  You can get one free from irs.gov.

Then, the business has to be incorporated.  A sole proprietorship or partnership won’t work for building business credit.  Whether you choose to organize as a corporation, S-corp, or LLC will depend on the level of liability protection you want and on your budget.  Any of them work for business credit building. 

Another necessary step for your business to appear fundable is to have a separate business bank account.  Do not mingle personal and business expenses in the same account. Not only does that not work for building business credit, but it makes for a tangled mess come tax time.  

Lastly, and surprisingly to some business owners, your business needs a professional website.  Along with this goes an email address that is separate from the owners. The website needs to look professional, which probably means hiring a professional to do it.  A lender will be much less likely to take you seriously as a business if you have a poorly put together website in today’s business world. The email address needs to have the same URL as the website and not be from a free service such as Gmail or Yahoo.  Also, the website needs to have website hosting from a paid supplier such as GoDaddy. Free hosting doesn’t work for this situation.

Get Accounts Reporting

Start at the D&B web site and obtain a free D-U-N-S number. A D-U-N-S number is how D&B gets a company into their system, to produce a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

After you do this, you can start establishing tradelines that will report to the credit reporting agencies (CRAs).  These are part of the vendor credit tier. They are starter vendors that will extend invoices with net terms without a credit check.  When they report your payments, your credit score will begin to grow. 

Find out our picks for the easiest starter vendors to start with here. 

Retail Credit Tier

Once you have several vendor trade accounts reporting to at least one of the CRAs, then you can move onto the retail credit tier. These are companies like Office Depot, Staples, and Lowes.  The reason you have to go through the vendor credit tier first, before applying for these store cards, is that they need to see a PAYDEX score to grant approval. 

For example, Lowe’s likes to see a PAYDEX of 78.  The only way to get this is to start in the vendor credit tier. 

As you handle credit in the retail credit tier responsibly by making on time payments, your credit score will grow even more. 

Fleet Credit Tier

After there are several accounts from the retail credit tier reporting on-time payments, your score should be strong enough to apply for cards in the fleet credit tier. These are businesses such as BP and Conoco. Use this credit to purchase fuel, and to fix, and maintain vehicles

One such example is Shell. They report to D&B and Business Experian. They need to see a PAYDEX Score of 78 or more and a 411 small business telephone listing. This is another reason why a business contact listing is important.

Cash Credit Tier

Once you work through the vendor credit tier, the retail credit tier, and the fleet credit tier, your score should be stable enough to apply for cards in the cash credit tier. These are companies like Visa and MasterCard, but not related to a specific retailer as in the retail credit tier.

Monitor Your Business Credit

As you go through the tiers, and even after you are beyond the cash credit tier, you need to know what is happening with your credit. Make sure it is being reported and take care of any inaccuracies as soon as you can. 

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We can help you monitor business credit at Experian and D&B for 90% less than it would cost you at the CRAs. See: www.creditsuite.com/monitoring.

Accounts Receivable Financing Can Be a Great Option, But Don’t Stop There

Whether you are looking into accounts receivable financing because it is the best option for your needs or because it is the only option due to credit issues, you can work on building business credit in the meantime.  Personal credit is just not sufficient for business expenses.  

Our tried and true method for establishing and building business credit will ensure you have strong business credit.  Then, your financing is only limited by you needs, and not by your options.   

The post Everything You Need to Know About Accounts Receivables Financing  appeared first on Credit Suite.