Accounts receivable financing, also known as “factoring,” is a financial solution that increases cash flow for your business in 24 hours or less. It allows your company to sell its invoices for a small fee in exchange for an immediate payment advance of 80% to 90%. Once the invoice is paid by your customer, the reserve balance is sent to you, minus the fee.
An Example of How Account Receivable Financing Works
ABC Textiles is a medium-sized company based in Tijuana, Mexico, that exports products to distributors in the United States. ABC Textiles is growing rapidly thanks to a unique woven design that upscale restaurants have started using in their table settings. Numerous restaurants have recently placed large orders with ABC Textiles for their unique design.
This is good news for ABC Textiles, but fulfilling the large orders could deplete the company's cash reserves. Waiting 30 to 60 days for payment from customers is too long for the company. To combat this problem, ABC Textiles sells its customers' invoices to RTS International for a 90% payment advance. This influx of cash helps ABC Textiles fulfill its orders without the risk of running out of working capital.
Benefits of Working with RTS International:
- Cash delivered the same day we purchase an invoice.
- Back office and collections support are included.
- Our credit evaluation services help you assess the stability of your customers.
- Accounts receivable financing (factoring) is based on your customers’ credit standing, not your company’s balance sheet.
- This is not a bank loan. Your company assumes no debt.
How Accounts Receivable Financing Helps Your Business
Accounts receivable financing can help your business grow. When you get paid faster, you can quickly address operating expenses, qualify for additional financing options and gain access to early-payment discounts. Because RTS International also handles your customer collections, you can focus more energy on growing and expanding your business.
Accounts receivable financing, or factoring, is used by a wide range of companies that do not want to wait 30, 60 or 90 days on customer payments. This form of financing is especially valuable for rapidly growing companies with a high demand for short-term cash. Companies in seasonal industries also use accounts receivable financing to help manage large fluctuations in customer orders and operating costs.