While the rate at which everyone does business has increased tremendously from even a few years ago, one thing remains constant – invoices are issues with payment schedules of 30 days or longer. This forces businesses to wait up to a month or more for revenue to trickle in. When businesses want to boost cash flow and access revenue faster, they can choose between AR financing and AR factoring. While both methods may seem similar, they function in very different ways.
AR Financing at a Glance
Accounts receivable financing – or AR financing – is a form of asset-based lending. Receivables are used as collateral to create a line of credit that businesses can borrow against. Often, true AR financing involved term contracts, and the amount of financing available can go up or down depending on the number of receivables in a given review period. Some AR financing providers also impose upkeep fees on these asset-bas