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What is accounts receivable (A/R) financing?

Accounts receivable (A/R) financing, sometimes referred to as invoice financing, can provide your business with funds if you have unpaid invoices you’ve issued to customers. This can be helpful for companies that have a large amount of earned revenue that is yet to be received.

What is accounts receivable financing?

Accounts receivable financing is typically structured as an asset sale. In this type of agreement, a company sells accounts receivable to a financier. This method can be similar to selling off portions of loans often done by banks. A business receives capital as a cash asset replacing the value of the accounts receivable on the balance sheet.

Why is accounts receivable financing so important?

Many companies may see accounts receivable as a burden since the assets are expected to be paid but require collections and can’t be converted to cash immediately. As such, the business of accounts receivable financing is rapidly evolving because of these liquidity and business issues.

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