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Leverage Your Account Receivables For Working Capital

Meridian PO Finance is a “one-stop shop” for your short-term working capital needs. We can fund you when your bank can’t. We fund you without demanding equity or collateral. How do we do it? We use a powerful, time-honored financial solution called factoring. Watch our short video here for a quick explanation, and we’ll provide more detailed information on account receivable financing throughout the rest of this page.

The Added Benefits of Accounts Receivable Financing with Meridian:

In a nutshell, account receivable or “invoice” factoring is a transaction in which a finance company buys your invoice and advances you cash on it, ordinarily 70-85 percent. The finance company collects the invoice from your customer and pays you the balance, minus its fee of 2-4 percent.

This arrangement immediately solves two problems for you:

  • Cash Flow: When you need it, you need it. There’s no substitute for it. And yet conventional bankers seldom share your sense of urgency. Investors treat your urgent situation as an opportunity to demand equity for indispensable working capital. Structurally, you are partnering with wrong kind of financiers. Your working capital solutions lie in factoring your invoices, perhaps even factoring your purchase orders. The longer you wait for your money, the fewer deals you can squeeze into your fiscal year. Factor your invoices and move on to the next money-making deal.
  • Collections: If you love collecting, skip this paragraph. If you hate paying and equipping an in-house staff to collect slow-moving invoices, you’re going to have a warm spot in your heart for invoice factoring. Account receivable financing companies like Meridian PO Finance assume the burden of collecting your invoice after they buy it. Re-assign your collection staff to sales or operations. Or don’t hire them in the first place.

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In Which Ways Can Account Receivable Financing Help Small Businesses?

Small businesses have cash flow needs, just like the largest corporations. Businesses of all sizes require the constant re-infusion of working capital to thrive. But while banks are responsive to their largest corporate customers’ cash flow needs, or even proactive, they prioritize small business needs lower, and often treat smaller borrowers like pests.

You’ll get over any indignity, but you don’t want your business to fall victim to a cash flow crisis that could have been prevented by access to timely financing. You already have that access, if you’re fulfilling contracts to creditworthy customers.

Why not thrive?

Many small businesses were battered during the recent recession, and their credit reflects the trauma. The newest start-ups haven’t had time to establish strong credit, and find themselves under-resourced. Account receivable financing is a solution for small businesses with weak credit, because the transaction is based on the invoiced customer’s payment history, not the entrepreneur’s credit. Sell your creditworthy invoice at discount in return for advanced payment & collection services.

The value of the account receivable financing company’s collection services shouldn’t be underestimate. Many entrepreneurs report collections are an energy drain that saps their enthusiasm for the core business. Companies like Meridian PO Finance have the potential not only to stabilize your company finances, but to give you your joy back.

Why Is Account Receivable Financing a Good Alternative for My Business?

  • Access to working capital:You’ve already invested your own capital fulfilling the order, and now you need to invest it in your next deal. With account receivable financing, you’ll be able to offset capital tied up in receivables.
  • Agility: Invoice factoring decisions are swift. At Meridian PO Finance, we often decide within 24 hours after you submit a complete application. This empowers you to take advantage of time-sensitive opportunities in your industry.
  • Sensible process: Factors are not bureaucracies. They work on commission, so there’s no incentive for complacency or sloth. Their paperwork is reasonable in scope and transparency. At Meridian PO Finance, our application forms are posted on our website. You can look them over right here, if you like.
  • Clean transaction: You don’t need to worry about bank restrictions or giving up equity when you factor your invoices or purchase orders. It’s a clean, quick transaction without any monthly payments stretching to the horizon.
  • Rational credit: Invoice factors care about the customer’s payment history, not yours. If you’re climbing out of business trauma, or if you’re a new start-up without established credit, your invoices are still valuable if you have good customers.
  • Growth: Growth isn’t cheap. You need to re-invest much of your revenue back into your business opportunities, and you need it now. Factoring your accounts receivable can get your money back to work in your business sooner.

How Can Invoice Factoring Increase My Company’s Cash Flow?

You could demand cash on the barrel-head from your customers, but you probably wouldn’t have many customers (or much cash). So, you give them terms. Thirty days, 45 days, 60 days, maybe even 90 days. Now you’re not just a builder or transporter or manufacturer, you’re a lender. That money is unavailable to you until your customer pays.

Along comes your next customer who wants to do business with you, and you’ve got all systems, equipment and personnel to conclude a very profitable business deal with them. But you don’t have the money anymore. Your previous customer still has it. You might offer the previous customer a discount to pay earlier. You might approach family members or private investors for working capital. But private investors tend to want a piece of your company in return.

The cleaner transaction is to factor your invoices. Factoring is selling your creditworthy invoices to a finance company that advances you between 70% to 85% cash immediately, and pays the remainder, minus a 2% – 4% percent fee, after the customer has paid.

A company can’t grow or function without continuous reinvestment. You’ve got to keep the lights on, pay your leases and taxes, make payroll, keep your technology current and push sales. That requires cash, not mere balance sheet assets. Accounts receivable are not spendable. But account receivable factoring can turn your invoices into cash that you can send back into your business.

Don’t wait for a cash flow crisis before you begin to plan for your working capital needs. You know how banks are: slow and opaque. If you want a more responsive and transparent financial partner, find a good account receivable financing company.

It’s to your advantage to establish a business relationship with an account receivable financing expert, and teach them about your business. You want them to have enough knowledge of your business cycle that they’ll anticipate your working capital needs, and tailor cash flow solutions to your circumstances.

Meridian PO Finance has established a reputation for such tailoring. If you’re in the Pacific time zone, we answer our phones Monday through Friday til 5pm. Of course, that’s one hour later for each additional time zone east of us. (East Coast businesses can call us til 8pm.) We’ll ensure that your business benefits from our account receivable financing. Our experts ensure that your business will benefit from our receivables financing. For more information, contact us today or call toll-free at 866.988.6868.

How Can I Benefit by Combining AR With Purchase Order Financing?

There are two different types of factoring: account receivable or “invoice factoring”, which we’ve already described on this page, and purchase order financing. Both are covered by the umbrella term “factoring.”

The most obvious difference is that purchase order financing occurs before the order has been fulfilled, before a customer owes you any money. The eventual payment by the customer is farther in the future. The factor’s risks are higher for purchase order financing than for account receivable financing, thus fees are higher.

Because the factor is advancing cash for future operations instead of buying the invoice on a completed deal, the paperwork is necessarily more extensive. Your credit and business history come into play. You can examine our online purchase order finance application here.

Although the purchase order financing process isn’t quite as sleek and aerodynamic as account receivable financing, there are situations when nothing else will do.

If your beaming sales staff announces they’ve secured an order from a blue-chip, big-box retailer for three million widgets by Black Friday, can you afford to fulfill that order? If you win a large federal contract that will quadruple your payroll, can you manage that out of your reserves? You probably need to consider factoring your purchase order.

Although the purchase order financing application is longer than the account receivable financing application, it’s still much shorter than a bank’s loan application. Approval is still much swifter than a bank’s.

You might want to combine purchase order financing with account receivable financing. You can finance enough of your purchase order to get over the hump and into production, then finance the remaining invoice later at the lower rate. This is much easier if you deal with a finance company that does both kinds of factoring. In fact, it’s often impossible to arrange among competing finance companies.

Once you find a factor who understands the pace, rhythms and surges of your business cycle, it’s wise to stick with them. This is the sweet spot where a factor can add value, and help you to optimize your revenue flows. Meridian PO Finance does both types of factoring, and has built a reputation as a “one-stop shop” that can tailor a coordinated solution to your complicated future working capital needs.