Merits & Demerits of Accounts Receivable Loan for Small Business

Business owners sometimes have to encounter certain situations where they are left with barely enough in-hand cash. This can be major drawback and can lead to massive losses in their business. Business owners sometimes have to encounter certain situations where they are left with barely enough in-hand cash. This can be major drawback and can lead to massive losses in their business. Holding and maintaining a steady cash flow is imperative for most business setups and it serves as a core reason for success and profit. In times of such despair, businessmen can stabilize the financial situation by opting for an accounts receivable loan also known as accounts receivable financing.

But, businessmen must be completely aware and well-informed about the loan and using it for financing their business. If the benefits are channelled properly, a finance loan can really boost up a business and steer its way to the peak. On the other hand, there are demerits of such loans and if not aware of the same, a business can get into deeper trouble. Let us quickly take a look at the merits and demerits of accounts receivable loan.
Merits:

Large Amounts - Considering that factoring companies do offer large amounts as receivable loan to small-scale or micro-business groups, this is quite a major benefit. Small businesses can use the large fund for improving and incorporating better services and can also opt for more goods and variables. More goods, better service and good funding can greatly strengthen their stability while also help them to cater to a larger customer base.
Rapid Set Up – For these types of loans, the setup process is hassle-free and the credit process is really fast. Unlike others, factoring companies will keep you away from numerous procedures and banking formalities. The entire process is quick and very beneficial for businesses looking for quick cash without having to wait for a long time period for the loan to get disbursed.

Quick Growth – Irrespective of slow performances, low profits, and not so impressive track records, factoring companies will still support your business. Not only that, factoring companies will extend and expand their finances for your company as and when your company grows.

Turn Over – A turn over can be seen in a very short period when the factoring companies monitor the customers invoice which is not paid at correct time and date. As it reminds the customers of repayments from time to time, this helps maintain the services as per the guidelines.
Equity With Minimum Cost – Business owners can also get shareholders for business for the requirement of financings. Most investors seek high returns than cost in many cases which has become possible for new contributors in business.

Demerits:

Expensive - The amount of accounts receivable loan can sometimes be quite hard to get in certain scenarios. Moreover, it can get quite expensive even if you do receive the loan. The costs could vary depending on certain rates and charges which is mandatory to follow.

Fraud Factoring – It is highly advisable to beware of touts in this regard as identifying one from the market is different in this matter. A minor wrong decision could lead to a major loss and can potentially damage your business.


By: Stephen Perl

For more information about accounts receivable loan please visit www.invoicefactoringus.com

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Source: http://www.articledirectoryusa.com/article/category/finance/loans/merits-and-demerits-of-accounts-receivable-loan-for-small-business/

Article Tags: AR Financing , Invoice factoring financing , accounts receivable loan

Submitted On Oct 15, 2018. Viewed 106 times.

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