Posts Tagged ‘Receivable’
Accounts Receivable Financing- be Inspired!
Benjamin Zander and his wife wrote a book entitled: “The Art of Possibility; Transforming Professional and Personal Life”. Their intent is that “you can create a passionate energy permeating The Art of Possibility that will be a true force in your life. You can make your own rules. ” Their book is inspirational. You will be inspired if you buy and read it. The question is: how does this pertain to accounts receivable financing?
It’s all about attitude, enthusiasm and point of view regarding how to conduct your business. Can you make your own rules regarding how banks, commercial finance companies and other financial entities operate? Of course not. Can you make your own rules regarding how you utilize the financial recourses that are acquirable to finance your business? Absolutely!
Here are three examples how to harness the power of accounts receivable financing sometimes with other types of financing to grow your B2B business.
Case Study One:
A Solar Energy Company that designed and supervised the installation of renewable energy systems was unable to obtain bank financing. They were one of the area’s lowest cost providers of solar panels, system design and supervision. One of their biggest assets was Say Solar Tax Credits that are paid to homeowners who install the solar energy systems. An obligation from a Say to a consumer is not within the definition of an statement receivable. In other words, it could not be financed because it was not an obligation to a business. Using the art of possibility, the homeowners were persuaded to assign their solar tax credits to the Solar Energy Company. This transformed a consumer receivable into a commercial accounts receivable. Voila! The Solar Energy Company received accounts receivable financing it needed to grow.
Case Study Two:
An individual bought an Importing Company that had been financed with a bank’s SBA loan. As collateral for the loan, the bank put a UCC1 filing on the accounts receivable and inventory of the business. UCC refers to the Uniform Commercial Code in effect throughout the United Says of America. In some respects, it simplifies the process of lending, selling and borrowing nationally. In other ways it is very complex. A UCC1 filing by a bank usually prevents any further financing because there is no collateral left to be financed. It is similar to a first mortgage loan on a house. If you have a 95% loan on your house, no other financing is acquirable on the home because there is no equity to lend on. Using the art of possibility, the Importing Company was successful in convincing the bank to subordinate their UCC1 filing to another commercial lender’s UCC1. The Importing Company convinced the bank that it would be mutually beneficial to lower the bank’s UCC1 lien to a secondary position to grant a commercial finance company to offer new accounts receivable financing and inventory financing. Voila! The Importing business has a new credit line acquirable for growth. It is now more profitable and the bank is more likely to be repaid. This is a win-win situation.
Case Study Three:
A start-up Clothing Company involved in manufacturing, distributing and designing T-shirts landed a substantial buy order for their product. The product was to be prefabricated in China, and the Clothing Company lacked adequate funds to pay for the costs of manufacture and distribution. Using the art of possibility, the Clothing Company obtained a letter of credit to guarantee the Chinese works of payment, buy order financing to pay for the T- shirts upon delivery, and accounts receivable financing to pay the buy order company upon delivery of the goods to the customer in the US.
Accounts receivable financing can help your B2B business realize the art of possibility for growth and profits. Voila!
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What Makes You Qualify For Accounts Receivable Financing
There are often situations when small, medium and even massive companies find themselves in a tough spot as far as revenues are concerned. They are at a loss of funds or finance to undertake a project that is expected to give good results. In such a scenario the option acquirable for financing is accounts receivable financing.
Accounts receivable financing is a secured loan for which accounts receivables are pledged as collateral with financial organizations. For small businesses it acts as a boon to help improve their cash flow. Generally small businesses find it hard to receive finance from a bank as they have less credit rating to show because they are yet in a developing stage. Unless finance is available, it is not doable for business to grow at a good pace. A timely finance from finance companies or even banks proves to be helpful for their growth. They often have customers who do not pay before 30-60 days. In such cases the accounts receivable are given as security to a financial organization and finance is received.
Any company can opt for accounts receivable finance. It is very favourite with transport or trucking companies, construction companies, manufacturing companies, textiles, staffing and engineering and other small businesses. It benefits medium business and any other business that needs finance on a regular basis. These companies would need to have accounts receivable in hand. The companies who can remember for such finances would need to have accounts receivables from credit worthy customers.
Moreover, aging of accounts happen to very massive extent. They might have regular contracts with organizations with good credit history or government organizations. Some financial organizations also think about the period for which the credit is given, which they like should be within 30- 60 days. Companies which are experiencing modest speed of growth and find it hard to keep the cash flow constant find the accounts receivable finance very beneficial.
These finances ensure growth and stability of a company. The process is very swift and you can get the finance in a very short period of time. As finances are acquirable on a timely basis, the companies might be healthy to get some advantage of reduction of overheads. The processing time of this type of financing is very less. Some of the companies also have online submission, and invoice submission systems which are then verified and checked and finance is wage in less than 2 days also which is a very timely help for these companies which need finance to undertake their regular activities. One more benefit that you get from such a finance function is that the accounts of the companies are managed superior as proper records and collection on the due date is very important. For the small companies it is an additional benefit that the business in itself is well organized to make the entire process cost effective.
Accounts receivable financing is acquirable to all those organizations that are in important need of finance or cash and are caught up in tricky situations wherein customers make payments very late. Companies find this financing highly beneficial to keep the growth of their organization on track.