Accounts receivable financing is well-known as a cash flow management solution. Companies use it to get fast working capital when unexpected costs pop up and invoices are out but not paid. They also use it to regulate cash flow by financing every few weeks. Can you use it for the working capital needed to expand, though? Yes, you can, and it is not hard if you already finance your invoices regularly.

Reinvest in Expansion

The key to using this tool for growth is to finance and not a factor. Remember, factoring sells your invoice, landing you a one-time payment that lets you discharge it from your books. Financing gets you an advance against payment. If the payment comes on time, the factoring company deducts its fees and the original advance before forwarding you the balance. If you plan your budget around the first payment, the second becomes capital for supplies, personnel, and more expansion costs.

Benefits of Using AR Financing

Building your company’s growth plan around accounts receivable financing is a strategy that is getting more popular because of its distinct benefits. For starters, it does not show up on your credit report as debt. So you can apply for equipment loans and other forms of financing without worrying about the impact of regular cash advances on your credit score. There is also the impact that having regular payments out to your vendors and subcontractors will have. As you expand, you’re going to need to order more and more from each, and you won’t find a friendly reception if you aren’t current on accounts.

Opening a 2nd Location?

Using the backend payments to build up enough capital to put down payments on new equipment or financing new hires’ onboarding is a great way to build your volume of business. But what about opening a new location? If you want to expand your business radius, you need to be able to make your goods and services available conveniently to people further from your original shop. Accounts receivable financing can help with that too.

Build Up Business

Maximizing the volume of business you can do at your first shop is the key to getting the capital to open a second one. You see, you will not only build the capital needed to fund the second set of facilities. But you will also wind up with equipment and personnel you can spin out to staff the location with experienced supervisors. Once you have the income to support the building costs, it’s just a matter of doing the work to open up.