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Accounts Receivable Factoring Options

by

Allan Michael Taylor

Accounts receivable financing should be thoroughly evaluated as a practical strategy to replace conventional bank business loans for any small business owner trying to keep their operation afloat. A temptation for borrowers to eliminate options prematurely because they appear to be too costly or complicated is one of the biggest hurdles in this process. There will not always be be a cheap or simple solution to the commercial finance difficulties for a business, and it will usually be prudent to keep all workable options under consideration. For many businesses, receivables factoring might be the only business financing option that can be successfully arranged. When “Plan A” is bank financing that is often not available in the current commercial lending environment, receivables financing deserves serious consideration even though it might be viewed by some commercial borrowers as “Plan B”.

Understanding it sufficiently to be comfortable with how it works in practical terms is one of the primary challenges in considering any specialized approach to commercial financing. Among the previous attractions for using a traditional bank business loan was probably a firm belief that commercial financing from banks was simple and straightforward. A growing realization that the typical bank approach was not so simple after all has recently emerged. Because of obscure recall clauses that allow many banks to cancel commercial finance agreements with little or no advance notice, many commercial loans made by banks are now being revoked. With very little warning, business lines of credit are also being eliminated or decreased by a large number of banks. The need to find an effective source of working capital loans and other small business finance options to replace bank financing that either can reasonably be expected to vanish within a few months or has already disappeared is a harsh reality for most small businesses. Whenever possible businesses should first attempt to accomplish this by reducing their overall commercial debt. Commercial borrowers should focus on the most realistic alternatives for raising additional capital to maintain cash flow at an acceptable level when it is not practical to reduce business debt. Exploring the viability of securing more equity financing is one strategy for accomplishing this goal. This path requires taking on one or more new partners who will then have a piece of the business in exchange for providing capital. These options will not be practical for many business situations even though reducing debt and increasing equity financing can be very effective solutions. The use of accounts receivable factoring is likely to be on the short list of strategies to improve cash flow and obtain working capital quickly for any business that has substantial accounts receivable. As a practical replacement for conventional bank financing, accounts receivable factoring is a commercial financing option that is being reviewed by many small business owners. The increasing need to replace traditional banks as an ongoing source of commercial real estate loans should not be ignored by prudent business borrowers.

Stephen Bush and AEX Commercial Financing Group are a reliable source of

business financing services

. Stephen has offered

business cash advances

and

small business loans

for 25 years

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