Seasonal businesses face lots of challenges to stay in operation year after year. The variable income can make that difficult, and sometimes capital is needed to make decisions that will benefit the longevity of the organization. Businesses can use accounts receivable financing as an option to provide capital and continue working toward operational and financial goals, even as a seasonal company.
What is Accounts Receivable Financing?
Accounts receivable financing, sometimes called invoice financing, provides an advance based on the amount in outstanding invoices in your organization. Once the money is collected from the outstanding invoices, the money is repaid that was given as an advance. This type of financing is similar to factoring, but in factoring, the financial institution takes over the outstanding invoices. In accounts receivable financing, your organization is still responsible for collecting on those invoices. This can be a good way for organizations to have capital while they are still in the process of collecting on outstanding invoices.
Planning ahead is essential for seasonal businesses, especially if you’re considering accounts receivable financing. One of the challenges in a seasonal business is the variable income. By planning ahead, you can use your advance wisely to help keep your business in the black year-round. That will not only be helpful for your credit and reputation with financial institutions but will also be helpful in achieving your business goals as a seasonal business. Accounts receivable financing works best when it’s used to benefit the long-term strategy of the business rather than patching over problems that aren’t being properly solved.
If you decide to use accounts receivable financing, you can make decisions that will help your business stay successful all year long. By making sure you fully understand accounts receivable financing and making smart decisions with the advance, the money can be a benefit to your business instead of a stop-gap to keep things running until your slow season is over.