When small businesses manage to find customers and increase sales, owners naturally want to capitalize on that prosperity and enable further growth. However, often funds are tied up in unpaid invoices, making it impossible to hire more employees, upgrade software, purchase inventory, or expand to new outlets. Accounts receivable financing allows you to sell those invoices to a factoring company for an advance of 80 to 90 percent of their value. When your clients pay up, you receive the balance minus a factoring fee. Here are some of the advantages of accounts receivable financing.

Receive Funding Quickly

When opportunities become evident, you usually need to act as quickly as possible. Accounts receivable financing helps you turn unpaid invoices into cash within one or two days without going into debt.

Stabilize Cash Flow

Offering payment terms to your clients means that you may obtain a sudden influx of cash followed by a prolonged drop in income. However, you still have to cover expenses and prepare for upcoming opportunities. Accounts receivable financing stabilizes your cash flow so that you can continue to prosper and plan ahead in a more efficient manner.

Improve Employee Morale

If uneven cash flow causes you to be late paying your personnel, this can be disastrous for morale. The stabilizing effect of accounts receivable financing on your cash flow helps your employees feel more secure. As a result, they will be more energized and give you their best work.

Manage Seasonal Downturns

Many small businesses perform better during certain seasons. For instance, sales may surge during the Christmas season but then slow down afterwards. Accounts receivable financing helps you more effectively manage gaps in income during slumps in sales after peak seasons. The funding coming in will tide you over until you reach the next lucrative stretch.

For more advice on using accounts receivable financing to help fund your small business, get in touch with KMS Funding.