What is Accounts Receivable Financing?
While it may seem complicated at first, accounts receivable financing is simply what it sounds like – a loan given to a business, which uses the business’s accounts receivables as collateral in the financing agreement. Accounts Receivables, often referred to as “AR” are any outstanding invoices or money owed to the business by customers.
The amount of the loan given by the financing company will be based on the total value of the accounts receivable that the company submits. The loan will usually not be exactly equal to the value of the AR, but rather a reduced value of the total.
Why would a business use it?
The primary benefit of accounts receivable financing is that it allows companies to free up the cash that is tied up in accounts receivables which, by definition, is money that is owed to the company which hasn’t yet been paid. If a company has a rather large amount of AR sitting on their records, but they need immediate cash to either undertake a time sensitive project or pay certain expenses, then an accounts receivable loan can help immensely in the short term, and is able to be paid back once the accounts receivables have been collected. With the accounts receivable funds, companies can restructure, take advantage of time-based supplier discounts, hire an increased workforce, fund payroll, or put cash towards many other growth opportunities. For these reasons, accounts receivable financing is a very attractive option for businesses of all sizes.
Crestmark, a great choice for AR Financing
Now that we’ve defined accounts receivable financing and its benefits, you can determine if it’s right for you and your business. If so, a great first choice in choosing your lending company is Crestmark. Crestmark is FDIC-insured (taking out a lot of the risk of typical AR financing) while also offering non-traditional financing options. The process with them is straightforward: upon signing up for AR financing, businesses simply have to send Crestmark a copy of a given invoice and any supporting documentation along with it. Crestmark will then credit up to 90% of the invoice’s total to the business, usually within 24 hours.
One of the additional benefits of this Crestmark arrangement is that they will then utilize their invoice management team to follow up with your clients on your behalf and insure they pay their invoice, taking this sometimes painful step out of your hands. Once the invoice has been successfully paid, Crestmark releases the remaining 10% of the invoice to you directly, and simply deducts their administrative fee out of that sum. The Crestmark online platform is responsive and immediate, so you can always check which clients have paid and which still have to.
The primary transaction size of Crestmark AR lending program is $0-7.5 million at a time. This sum is spread out across the businesses accounts receivable invoices, up to 90% of each invoice at a time, as previously stated. Advances can also be requested as often as daily, if accounts receivables are known to be coming in imminently.
Crestmark prides itself on having competitive pricing to all other AR lending banks, and boasts its qualification as an FDIC-insured bank. They claim to have some of the fastest response times in the business, which is crucial in accounts receivable lending since time and short-term aid are the primary benefits of these arrangements.
Reviews of Crestmark’s Service
Crestmark is one of the most highly regarded businesses in the accounts receivable lending industry. It has a long track record of helping businesses succeed with their financing, operating in such a capacity since 1988. The firm has received an A+ rating consistently from the Better Business Bureau, and is virtually always listed in the top 5 financing companies for small businesses.
Some of the key takeaways when comparing Crestmark to its competitors in the space are Crestmark’s typical loan lending size (up to $7.5 million) which is significantly larger than most others’ options. Additionally, Crestmark is known to be one of the only financing providers to offer referral rewards. These rewards give businesses the chance to earn additional income and other rewards when any business they referred signs up for any of Crestmark’s financial services.
Reviews of Crestmark’s accounts receivable financing service all have similar key points, relating to the service’s straightforwardness and speed. Customer service also receives high marks in most of its reviews.
If your business could stand to benefit from additional funding, but you don’t want to put up equipment or equity stake in your company as collateral, accounts receivable funding can be a great way to accomplish your goals. There are a few different choices for AR financing, but we believe Crestmark to be the way to go; the company is a fantastic place to start your financing search, offering very competitive terms, a smooth platform, and great customer service.