WHY DOES A BUSINESS NEED THIS?
When Revenue Isn't the Same as Cash
Imagine a staffing company invoices its customers $500,000 this month.
The customers are reputable companies.
The work has been completed.
The invoices are legitimate and collectible.
But the customers don't pay immediately.
Their payment terms might be:
Net 30
Net 45
Net 60
Here's the problem:
The staffing company's employees don't work on Net 30, 45, or 60.
Payroll is due this Friday.
Rent is due.
Insurance is due.
Taxes and operating expenses are due.
And the company may need additional cash to continue placing workers and taking on new contracts.
So the company may have $500,000 in accounts receivable, but it does not necessarily have $500,000 sitting in its bank account.
That creates an important distinction:
Revenue earned ≠ Cash collected.
The business has earned the money, but it is still waiting for its customers to pay.
That gap between earning revenue and collecting cash is where accounts receivable financing—commonly known as factoring—can become a source of working capital.
Instead of waiting weeks for customers to pay their invoices, an eligible business may be able to convert those receivables into cash sooner, giving the company access to working capital while it waits for its customers' normal payment cycle.
Educational information only. Olsen Business & Financial Solutions Consultants (DBA - BizMoolah) does not provide legal advice. Financing, restructuring, consolidation, and other solutions are subject to qualification, availability, creditor approval, contractual terms, and applicable law.