Accounts Receivable Financing FAQ


Q: What does it cost?
A: The fee charged for A/R financing is based upon your volume. In general, expect it to be between 3% to 5% for the first 30 days. Companies with higher volumes will receive preferred rates.

Understand... if some customers are slow paying, the longer they take, the more it will cost.


Q: I offer my best customers a 2% discount if they pay within 10 days. Should I continue to do this?
A: When the invoice says “2% 10 days, NET 30 days”, do you still have customers take a 2% discount and then pay in 30 days?

With A/R financing, you get paid within 2 to 3 days. Therefore, no need to offer your customers a discount, so change all your invoices to “NET 30”.


Q: A/R financing costs more than a bank loan.
A: You cannot compare the two. A bank loan is a loan. A/R financing is the purchase of accounts receivable.

If you want to compare loans from Bank A and Bank B, then you can look at the terms and see how the interest rate, fees and amount differ.

As an example:
A bank loan of $100,000 at 9% will equal $4940 of interest in one year.

When you sell invoices at 4% (fee) you have use of the funds for 30 days. The fees paid is your cost for use of the funds. Therefore, if you sell $100,000 worth of invoices during the year, your cost would be $4000 (assuming all customers pay within 30 days). Similar to a revolving line of credit that you use and pay off every 30 days.

You think nothing of taking credit card payments. When you take credit card payments, you are doing a form of A/R financing. Do you feel that those rates are too high?

The main question is... “When the lender gives me the advance payment, can I turn that amount in 30 days to produce more than the fees I pay?”


Q: I invoice both businesses and individuals. Can I do A/R financing?
A: In general, you can do A/R financing for your business customers. You need to contact us to discuss the options for individuals.


Q: I own a service company. Can I do A/R financing?
A: Yes, as long as your work has been satisfactorily completed, the customer invoiced and he has no complaints.


Q: Can you do all of my customers?
A: A/R financing is available to your customers with satisfactory credit ratings. If you have a customer with a low rating or no history, they may have to provide additional financial information.


Q: Do you have any minimums?
A: Yes. Based upon your sales history and projections, the A/R financing contract will have minimum monthly and annual volumes. Also, there may be a minimum invoice amount. If this is a concern, please contact us for further discussion.


Q: I sell on consignment. Can I do A/R financing?
A: A consignment situation is more difficult to do because the customer may want credit for returns or unsold goods. It is best you contact us to discuss it in detail.


Q: Do I have to sell all of my invoices?
A: It depends upon your situation. If you have a good customer who pays quickly (15 to 20 days), then no need to do A/R financing on him. Or no need to do small invoices.


Q: I have over 100 customers. Can A/R financing work for all of them?
A: If you have many active accounts, you need to ask...
1) Who purchases from me on a regular basis?
2) How quickly do they pay?

Ideally, A/R financing should be done on your top 10 volume customers, especially if they take more than 15 days to pay. You can always add other customers as you need.

For customers with smaller invoices (say under $500) or those who order a few times a year, it would be cost effective for them to pay you directly.


Q: I do not want my customers to know I am using A/R financing. Can you make everything confidential?
A: If you feel you will lose customers because they will see you as being weak, then you would eventually lose them whether you do A/R financing or not.

A/R financing is acceptable amongst Fortune 1000 companies. It is seen as a savvy way to do business. They achieve good cash flow and do not tie up their other credit lines.

Customers do not care where they send their payments. (Just look at the address where you pay your credit cards. This month it may go to a post box in one city and next month to another city.)

Your customer’s buyer may not even know where the Accounts Payable clerk sends the payment. If they do ask, just tell them you use A/R financing to make your company operate at peak efficiency so you can offer them low prices and quick service.


Q: I have a service contract with my customer for XX months. Can I do A/R financing?
A: Yes, as long as you invoice your customer on a regular basis. If you only bill him once, say at the beginning or you have a special situation, please contact us for further discussion.


Q: Can I do A/R financing with my overseas customers?
A: Overseas customers are more of a challenge. Please contact us to discuss it.


Q: I have a loan with my bank and the A/R is used as collateral. Can I benefit from A/R financing?
A: A/R financing may still work for you. First, we need to speak to your bank and arrange for them to release the A/R.


Q: I am a sub-contractor in the building trade. Can A/R Financing work for me?
A: Yes, as long as you are billing a general contractor and they pay upon completion of a job.


Medical Accounts Receivable Financing FAQ

Q: I have a large stack of old billings, can I do those?
A: If the billings are over 60 days old, most likely there are billing errors. With Medical A/R financing, most of those can be cleaned up.


Q: Why is the amount you are advancing so low?
A: The advance rate is based upon what the insurer will pay for a procedure. You know how it
is... you can bill for more, but the insurance company has its agreed rates.


Q: Will Medical A/R financing work when we directly bill the patient?
A: No. A/R financing works when companies are billed. When you bill patients, it is considered consumer lending and different laws apply. If more than 50% of your billings are to patients, please contact us to discuss other options.


Q: Our company provides lab services. Will Medical A/R financing only work for insurance billings and not billings to clinics and hospitals?
A: Labs, supply houses and staffing companies can benefit from Medical A/R financing as long as they bill companies. Please contact us to discuss your specific situation.

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