Account Receivables

Written by Linda Alexander
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While waiting for your account receivables to be paid, is there anything you can do to hasten the flow of your cash? According to financial experts, there are several ways to borrow money to tide you over while you wait for your account receivables to come in. They include contract financing, factoring, and receivables financing.

Contract financing is a way to borrow money against a percentage of your outstanding contracts. If you have a startup company and cannot qualify for other types of loans, this is a good option. Fees range from three to five percent per month, which is expensive, but can keep you in business if you need immediate cash to operate your business.

Another way is to borrow against your account receivables. This is called factoring, where you sell your receivables at a discount to bring in cash right away. The factoring company will collect the money from your customers when the invoices become due. In return, they give you up to 80 percent of the outstanding money immediately.

Account Receivables Financing

Accounts receivables financing is a third way to bridge the gap between immediate cash needs and the time it takes to receive money for your invoices. This is where you use your receivables as collateral for a short-term loan. These are also called cash flow loans, and are usually repaid within 12 months.

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