Accounts Receivable Financing

To understand Account Receivable Financing, it’s important first to understand the “ACCOUNT RECEIVABLE.” Account Receivable means the company’s remaining or outstanding invoices or the money which their customers owe. Account Receivable Financing allows businesses to receive early payments on their outstanding invoices.

Sometime there comes the situation where many times small business owners get frustrated when their customers have already received goods, products and services but did not make the payments and sometime it takes several days, weeks or even months! Many times businesses don’t have that much Cash Reserve to wait that long for the payments. Meanwhile, during that period of time, the cost of doing business doesn’t change and your business still needs to produce the same amount of goods and services.

You still need to pay your electricity bills, your rent if the place is rental, you need to pay to your employees, you need to purchase goods and services to supply them, and all these business expenses require payment in that limited amount of time. So when the invoices go unpaid for a long time, the impact on your businesses’ cash flow can be severed.


And this is how ACCOUNT RECEIVABLE FINANCING comes into the picture and can become the perfect solution. So after ACCOUNT RECEIVABLE FINANCING, your business doesn’t need to wait 30-60 days to get paid by their clients.


Gold Card Capital provides the most prominent affordable funding to smooth-out the businesses’ cash flow and provide you with access to short-term working capital.

There are mainly three primary types of Accounts Receivable Finance:

1.  Asset-based lending (ABL):

Also known as a business line of credit or traditional commercial lending, asset-based lending is an on-balance sheet technique and typically comes with significant fees. Companies commit the majority of their receivables to the program and have limited flexibility about which receivables are committed.


2. Traditional factoring: 

In factoring, a business sells its accounts receivable to a funder – but the initial payment is for less than the full amount of the receivable. For example, a company may receive early payment for 80 percent of the invoice amount minus processing fees. Compared to asset-based lending, companies have more flexibility in choosing which receivables to trade, but funder fees can be high, and credit lines may be smaller. As with ABL, any factored receivables are recorded on the company’s balance sheet as outstanding debt.


3. Selective receivables finance:

Selective accounts receivables finance allows companies to pick and choose which receivables to advance for early payment. Additionally, selective receivables finance enables companies to secure advanced payment for the full amount of each receivable. Financing rates are typically lower than other alternatives, and this method may not count as debt based on the program structure. Because selective receivables finance stays off the balance sheet, it does not impact debt ratios or other outstanding lines of credit.

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