Accounts receivable financing
Also called: AR financing
Accounts receivable financing uses your unpaid invoices as collateral for an advance or line of credit, so you borrow against receivables without selling them.
Unlike factoring, which sells the invoices outright, accounts receivable financing keeps the invoices on your books and uses them as security. You draw funds against the value of outstanding receivables and pay down the balance as customers pay you. You keep control of collections and the customer relationship.
It suits businesses that want liquidity from receivables but prefer to manage their own collections. Cost is usually a fee plus interest on what you draw, and approval depends on the quality and aging of your receivables.
Common questions
How is AR financing different from factoring?
Factoring sells your invoices to a third party that collects from your customers. AR financing borrows against your invoices while you keep them and handle collections yourself.
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