Accounts Receivable Financing

1. A Growing Industry: Accounts Receivable Financing By – M1Xchange.com

2. Introduction Credit is the lifeblood of a small business, and when it comes to financing, banks are usually the easiest place to get money. But times have changed since the Great Recession and banks aren't lending like they used to. Now there's a new way for small companies to get the cash they need—accounts receivable financing—but it isn't always easy for businesses to understand this new type of lending.

3. It's growing because the industry has had to grow up. In 2008, the economy collapsed. The recession hit businesses hard and forced them to cut costs wherever possible. Accounts receivable financing gave companies a way to keep their doors open when they were having trouble collecting from their customers. The industry has had to grow up in order to meet the needs of today's market. A few years ago, they were called "factoring firms" or "accounts receivable lenders". Today, they're often referred as simply ARFIs (Accounts Receivable Financing Institutions).

4. Pre-recession, banks were the place companies looked for financing. For the majority of companies, banks were their only option for financing. Before the recession, banks were the only financial institutions who extended loans and lines of credit to small businesses. Banks have a reputation for being risk-averse. They are slow to lend, they don't respond well to change or flexibility in terms of payment methods or timing and they are not transparent with their customers because they don't want competition from other lenders like peer-to-peer lending platforms (or even other banks). Bankers also aren't honest with their customers because they don't want to lose them as clients; if you ask a banker why he can't extend your line of credit by another $500K so that you can pay off your debt earlier than planned and then save on interest payments over time—especially when it's clear that the company's cash flow has increased significantly since last year—he'll say it's against bank policy or something similar that makes no sense from an accounting standpoint but still keeps him from doing what should be done anyway: helping out his customer!

5. But post-2008, bank lending slowed way down. Banks became more cautious after the recession and were less willing to lend money than they had been before. Banks tightened their lending standards, which meant that many small businesses that normally would have qualified for loans no longer did so. Banks were more focused on their own bottom line and survival than in helping out small businesses that needed their help maintaining cash flow for operations or expanding into new markets.

6. This left a financing void that many smaller businesses rely on. • Banks are increasingly unwilling to lend to small businesses • Larger companies receive more attention from banks than small businesses do • Loans that are risky or underperforming don't get approved by banks. • Interest rates on bank loans have increased to make up for the risk, but they're still less than what you'd find on an account receivable loan.

7. That created an opportunity for new lenders to step in. The economic downturn has created an opportunity for new lenders to step into the accounts receivable financing market. Many companies that traditionally used bank credit lines and loans are now turning to alternative lenders, who can offer more flexible terms than banks. But it also led to new problems. The industry is still young, so there are lots of new players. Some of these new players are not well-regulated, and they can make promises that don’t hold up in court in the event that a client defaults on payments. This means that small business owners must be careful when choosing their AR financing company, because if they choose the wrong one, they might end up with higher interest rates than they expected or hidden fees and penalties if they default on payments.

8. So where can a small business owner go if they need help with receivables? If you’re looking for help, there are a few things to keep in mind. First and foremost, it's important to know that not all accounts receivable financing companies are created equal. The best way to find one is by talking with other business owners who have used their services or doing research online. You can also check out the Better Business Bureau (BBB) website and read reviews of various companies that offer this service. Second, keep an eye out for fees and interest rates—and make sure they match up with what competitors offer. If a lender offers a lower interest rate than another but charges more fees, then perhaps it's time to look elsewhere. Third, don't be afraid of asking questions about how much money you will owe at certain points during repayment; lenders may not tell potential clients this information outright because it could cause them not to take on these loans due to fear about how much debt they'll accumulate over time if they can't pay back what they've borrowed quickly enough

9. Conclusion There are many options for small businesses to find the right financing for their business. It’s important to remember that each one is unique and has its own benefits and drawbacks. The best route will depend on your goals, current financial situation and how much risk you are willing to take on. We hope this article has helped shed some light on where you might look first as well as some of the pros and cons of each type of financing available today!

10. Thank You