These are hard times for many businesses, especially SMBs who may not have many assets to fall back on if their cash flow wanes. It’s all too easy to get into a trap where you have plenty of money, on paper, but it’s all tied up in outstanding invoices that your customers are slow to pay.
Then all it takes is one bad month, a weather disaster, or some other misfortune, and you find yourself overextended without the resources to pay your own bills.
Large businesses can call upon banks to extend a line of credit, but that’s often not an option for smaller businesses – or else the interest rates would be punishing. For SMBs, there’s another option that most companies can qualify for, with far fewer complications: a cash flow loan.
How A Cash Flow Loan Keeps You Afloat
Cash flow loans also called accounts receivable financing or accounts receivable factoring, are a way to leverage your outstanding invoices to create a line of credit.
When you work with a factoring company, they’ll take a look at your accounts receivable, and the amount you’re owed. If there are no other complicating factors, such as liens, they can then offer you a loan based directly on the amount that you’re owed by your customers. Then once you collect, you pay off the loan.
In other situations, your factoring company may be able to simply buy the invoices off you and take over responsibility for their collection.
You will lose some money owed on the transaction, but you can usually get anywhere from 70-90% of the face value of your invoices. That’s often less of a loss than sending the bills to collections or initiating legal action yourself.
There are numerous additional benefits to this arrangement as well:
- Credit requirements are minimal. Since you’re borrowing against a verifiable asset, it’s much easier to qualify for factoring than to get a bank loan.
- No punishing interest rates. The amount you pay back will be agreed upon upfront.
- Rapid turnaround. For new borrowers, the process usually takes less than a week. Once your account is established, you can turn invoices into liquid funds in just a couple of days.
- No arbitrary credit limits. The only limit is how much money you’re owed.
Camel Financial Has the Cash Flow Loan You Need