Commercial receivable financing
Finance is very important for any business activity.There are many institutions like banks, commercial lending centers etc that provide different types of credit facilities to businesses. All these facilities are included in commercial financing. One important commercial financial facility is the commercial receivable financing. It is also called as accounts receivable financing or factoring. Most of business units, whether established or newly developed, sell their products and services on credit terms. This means payment is not received upon selling product and services.
Such an act results in shrinking of working capital. By means of commercial receivable financing, a business unit can easily create an adequate cash flow in the business unit and business activities can easily be expanded. Commercial receivable financing is provided on credit sales made to all the commercial accounts of business unit. In the past few years, commercial receivable financing has become an important financing tool for businesses for fulfilling working capital requirements. Businesses of all sizes and types are now contacting lending institutions for this type of credit facility that is determined not by the financial strength of seller or client, but by the financial strength of customer of seller, i.e. buyer of products and services. Commercial receivable finance is not a loan as a business is not required to make regular payments or create debt for amount received. These accounts are self liquidating upon receiving of payments from the buyers.
One of attractive features of commercial receivable financing that has contributed greatly to its development and acceptance is the time period in which it can be obtained. As compared to other regular commercial finance facilities like cash credit, term loan etc, commercial receivable financing is provided in less time. There is minimal paperwork involved and a person can get the facility in few days only. Other contrasting feature of commercial receivable financing is that, unlike other regular commercial lending products, it is provided without taking into consideration the tax returns, financials and equity to debt ratios by most of lending institutions. All the decisions are taken on the basis of credit strength of the buyer and the invoicing process of seller. Even there are some lending institutions that provide commercial receivable finance in single day. Underwriting requirements are also very low and approval process of most of lenders is very simple and short.
Businesses selling their products and services on credit should understand that their credit invoices are a type of hidden collateral that can provide them money at simple terms and conditions. All concerned commercial receivables are pledged as collateral and businesses can draw funds up to the eligible limits on basis of collateral value.
Selection of businesses for commercial receivable financing is discretion of lender but most of lender provides this facility to businesses that generate sales on open credit terms and to buyers that have financial credit strength.
1st Commercial Credit is one of various lending institutions in United States that provide commercial receivable finance. Financing rate can be as low as 1.59% and is determined by sales volume, collection cycle and the type of industry. It can be contacted at 1-800-450-9653 for getting more information.
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