Managing Working Capital

How to Improve Cash Flow with Accounts Receivable Factoring

Cash flow is the lifeblood of any business, and for small and medium-sized enterprises (SMEs), it can often be a challenge to maintain a healthy cash flow. Traditional lending options, such as bank loans, are becoming increasingly restrictive, making it difficult for SMEs to access the funds they need. Business owners know the importance of having sufficient cash on hand to meet payroll obligations, especially when dealing with slow-paying customers.

Banks’ Conservative Lending Policies:

In recent months, banks have tightened their lending policies, making it harder for SMEs to obtain loans. Factors such as increased regulations, higher credit requirements and an uncertain economy have resulted in a decline in bank lending to small businesses. This can be particularly challenging for SMEs that need immediate access to funds to support their day-to-day operations, payroll, and taking on larger projects.

The Urgency of Sufficient Cash for Payroll:

For SMEs, ensuring that there is enough cash on hand to meet payroll obligations is crucial. Employees are the backbone of any company and paying them on time is essential for maintaining a positive work environment and retaining talented staff. However, when dealing with slow-paying customers or facing unexpected cash flow gaps, meeting payroll can become a daunting task. Having a reliable source of funding becomes paramount to avoid disruptions and maintain employee morale.

Accounts Receivable Factoring: A Solution for Cash Flow Challenges:

Accounts receivable factoring is a financing option that offers SMEs an alternative to traditional bank loans. In this process, a factoring company purchases the outstanding invoices from the SME at a discounted rate and provides immediate cash in exchange. This immediate infusion of money enables SMEs to bridge cash flow gaps and meet payroll obligations, even if their customers are slow to pay.

Advantages of Accounts Receivable Factoring:

  • Improved Cash Flow: By converting unpaid invoices into immediate cash, accounts receivable factoring boosts cash flow and provides SMEs with the necessary funds to meet their financial obligations, including payroll.
  • Reduced Reliance on Slow-Paying Customers: Rather than waiting for customers to pay their invoices, SMEs can rely on the factoring company to provide immediate payment. This reduces the risks associated with slow-paying customers and ensures a steady cash flow.

Quick and Convenient Access to Funds:

Unlike traditional bank loans, accounts receivable factoring offers a streamlined and efficient funding process. SMEs can typically receive funding within a day of submitting their invoices to the factoring company. This rapid access to funds enables businesses to address their immediate cash flow needs without delay.

Flexibility and Scalability:

Accounts receivable factoring provides SMEs with flexibility and scalability to adapt to their changing financial requirements. As the business grows and generates more invoices, the factoring facility can be easily adjusted to accommodate the increased funding needs. This flexibility allows SMEs to maintain a stable cash flow while taking advantage of growth opportunities.

In an environment where banks are making fewer loans and lending policies are increasingly restrictive, it is crucial for SMEs to have alternative sources of funding to improve their cash flow. By ensuring sufficient cash on hand, businesses can confidently meet their payroll obligations, even in the face of slow-paying customers. Accounts receivable factoring offers a viable solution, providing SMEs with immediate access to funds, reduced reliance on customer payments, and the flexibility to scale their financing as needed.

At American Receivable, we understand the challenges faced by SMEs, and we offer tailored factoring solutions to help improve cash flow. Apply today to learn more about how accounts receivable factoring can set your company on the fast track to success!

Jack Stieber   972-404-4726

Sarah Fischer    972-404-4726

Julie Adams   800-297-6652

Brad Gurney  800-297-6652

Dakota Stieber  512-339-5112

Voted best Invoice Factoring Company for SMBs for 2023 by


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