What Is Receivable Financing? Here’s What You Should Know

Receivable Financing

Receivable Financing

Receivable financing is actually thousands of years old. It is a standard practice in business where a financing company pays 80% to 90% of a business’ receivables (they keep the rest as profit). In turn, the financing company collects the payments from the customers.

Should you do receivable financing? Absolutely, especially if the terms of payment you have with your customers involve 30-day, 60-day, or 90-day payments. The benefits of financing are that you do not need to collect the payments yourself – the financing company will do that for you. Also, you are able to free up your cash flow. Imagine where you have a business that needs to wait 30, 60, or 90 days to continue doing business. It doesn’t work and will never work, especially if you have plans for expanding your business in a short period of time.

With receivable financing, you can receive the money from your customers through the financing company. If you meet all of the requirements, you can receive the money in no time at all and hence, you can go on to do business seamlessly.

Now, there are two types of receivables financing. One is called notification financing while the other is called non-notification financing. With notification financing, a customer will be notified of the financing agreement. With this type of financing, the customer needs to agree to that transfer otherwise, the financing company will not be able to collect. With non-notification financing, the financing company does not notify the customers. It just goes on to collect the receivables.

While it is easy to get notification financing, it is not so easy to have non-notification financing. Financing companies typically require more from you if you go for the non-notification package. On the other hand, with notification financing, if the customer does not agree to the transfer, the financing company will not push through with the financing package.

If you do not own a business, then you do not need to worry about getting receivable financing. However, if you own a small to medium-sized business and cash flow is very, very important to you, then you should go and find the best financing packages there are.

Where can you find receivable financing? You have two options. You can go for banks like HSBC or your local bank and get a financing agreement. However, there are financing companies out there that specialize in it and see receivables. We are not going to tell you which type of financing to go for or even tell you which institution to make agreements with. However, we are going to tell you to shop or go shopping for receivables financing packages.

Compare the terms and conditions of at least three and then make up your mind as to which one you should sign up for. With a little research, you should be able to find something that will free up your cash flow while at the same time seeing you from the headaches of collecting your receivables.