What is Accounts Receivable Financing?

There are several names that are associated with accounts receivable financing, such as asset based loan, AR Financing, etc. Whenever these terms are used, it is referring to a type of loan that allows you to secure financing by using collateral, as opposed to just credit or cash flow. When specifically discussing accounts receivable financing, we are referring to your accounts receivable or AR that your business has due from their clients. One of the advantages in AR Financing is that potential lenders look at collateral first, instead of cash flow or credit. This allows you to have access to favorable loan terms without having extra cash to make monthly payments. Using collateral in this case also lets you maintain liquidity in your business as you grow instead of taking some of that out to pay down a loan. AR Financing can be great for both high growth companies as well as companies that while being financially stable, don’t have excess cash flow to support additional, fixed payments. Another advantage is being able to shift existing term or fixed debt into a line of credit or factoring facility that will improve cash flow and your businesses liquidity.