Accounts Receivable Financing: What It Is and How it Can Help Your Business

Accounts receivable financing is a type of asset-based lending that provides small businesses with the cash they need to grow their business. The funding is based on your accounts receivables: money you owe to clients and customers. When you apply for an account receivable loan, the lender funds 90% of the outstanding balance owed on invoices—the remaining 10% will come from you (or your business) as collateral.

What Is Accounts Receivable Financing?

Accounts receivable financing is a way for businesses to get funding for their business. It's a simple concept, and with the growing popularity of such financing services, it's likely that you've already heard about this term before. But if you're still not quite sure what accounts receivable funding means or how it works, here's the lowdown:

• Accounts receivables financing lets companies borrow money based on their future credit card and other types of customer payments. This can be helpful when you need cash quickly but don't have time to wait around for approval from traditional lenders like banks or credit unions.

• Accounts receivable funding companies use algorithms to determine which businesses are most likely to repay loans based on past performance data they've collected from all sorts of sources (including social media). Then they make offers tailored specifically toward each applicant's needs by using whatever metrics are available—though typically these include things like debt-to-income ratio and personal income level.