How to Get a Loan From Your Account Receivables

New and small businesses may not realize that there is a valuable resource available to get needed funds for your company. Your business receivables account is more valuable than you think. It will provide money owed to you now, when you need it.

So what is business receivables?

Business receivables is the term used to describe money owed to a business from one or numerous accounts. These unpaid amounts are considered company assets as it is assumed payment is in progress. Therefore, these business receivables are recorded as such on the company’s balance sheets. Business receivables may include money currently due, money that is past due, in addition to money that is not yet due. Account receivables may also include long money that will not be due for months, or even years. This money is recorded as a long-term asset.

What to do if you need your business receivables now?

Needless to say, business receivables are best received. Without this anticipated money on hand, a business may not be able to meet payroll and pay payroll taxes, or make much needed purchases. Having money tied up when it is needed elsewhere is a huge inconvenience for a new or small company.

What is factoring account receivables?

There are companies that provide a service called accounts receivable factoring that will provide much needed cash in exchange for your valuable asset (your business receivables accounts). This cash may be in the form of an untraditional secured loan secured by the account receivable. A business may also sell (factor) their account receivables. If you have ever joined a gym where membership is to be paid monthly, but you are billed by a finance company, then your account receivable has very likely been sold (factored) upon your signing the membership contract. Factoring receivables simply means selling your invoices or account receivables “factor” at a small discount. This money can be converted into a type of “credit line” for immediate cash.

What if my business receivables are never paid?

Sometimes, business receivables go unpaid by the customer. The company writes off these unpaid invoices as a loss. However, the loss of these funds is also very bad for business. To prevent devastating loss to the corporation, the business will want to accounts receivables insurance. This insurance is available for domestic and international business receivable accounts.

Where do I start?

If you own a small or new business and need access to cash, consider selling or taking a loan against your business receivables account, but do your research first. There are many companies offering these services. Make sure you are working with a reputable company.

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