Your customers owe you money, but they're not paying fast enough. Sound familiar? You've finished the job, sent the bill, but your bank account is still empty. What if you could get paid today instead of waiting months?
That's where purchase accounts receivable comes in. It's like selling your unpaid bills to get cash right now. Thousands of business owners use this trick to keep money flowing when customers pay slowly.
What Is Purchase Accounts Receivable?
When you purchase accounts receivable, you sell your unpaid bills to a company that gives you cash today. It's like trading a $100 gift card for $90 in cash because you need money right now.
Here's how it works: Say your customer owes you $5,000 but won't pay for two months. A factoring company buys that bill from you for $4,600 today. You get cash now, they get the full $5,000 when your customer finally pays.
Need cash for your business today? Call us to see how much money you can get from your unpaid bills in just 24 hours.
This isn't borrowing money. You're selling something you already own - your unpaid bills. No loans, no debt, just cash for invoices.
How the Cash Process Works
Getting money from your bills is pretty simple:
Send Your Bills
You give copies of unpaid invoices to the factoring company. They check if your customers can actually pay.
Get Your Money
Once approved, they put 80-95% of your money in the bank within one or two days.
They Collect
The factoring company calls your customer and gets the money. You don't have to bug anyone for payment.
Get What's Left
When your customer pays, you get the rest minus their fee.
Most businesses get their money in less than a week. Many get paid the same day they apply.
Why This Helps Your Business
Get Paid Right Away
The best part is instant cash. Instead of waiting forever for customers to pay, you get most of your money today. This lets you:
- Pay your workers on time
- Buy stuff when you need it
- Handle surprise bills
- Get discounts from suppliers
- Grow your business faster
No New Debt
Unlike bank loans, this doesn't put debt on your books. You're selling something, not borrowing. Your credit stays clean for other things you might need.
Someone Else Collects
These companies are good at getting money from slow payers. They have better systems and more experience than most small business owners. This usually means you get paid faster with fewer problems.
Pick and Choose
You decide which bills to sell. Need money for payroll? Sell a few invoices. Got a big job that needs cash up front? Sell more. You control when and how much cash you get.
This vs. Bank Loans
Banks want perfect credit, collateral, and tons of paperwork. Getting approved takes weeks or months. They might say no anyway.
With purchase accounts receivable, they care about your customers' ability to pay, not your credit score. If you work with good companies, you can usually get approved even with bad credit.
What's Different:
| Bank Loans | Purchase Accounts Receivable |
|---|---|
| Takes weeks to get money | Get money in 1-3 days |
| Need great credit | Your credit doesn't matter much |
| Need collateral | No collateral needed |
| Creates debt | No debt created |
| Fixed amount | Grows with your business |
Banks give you one chunk of money to pay back. This gives you ongoing cash that grows as you make more sales.
Who Uses This Most
Any business that sends bills to other businesses can use this. But some types find it extra helpful:
Makers and Manufacturers
Need cash for materials while waiting for customers to pay.
Temp Agencies
Must pay workers every week but customers pay monthly.
Trucking Companies
Can't wait for slow payers when fuel and drivers need money now.
Service Companies
Lawyers, consultants, and agencies with big bills and long wait times.
Wholesalers
Need cash to keep products in stock between buying and getting paid.
What It Costs
Purchase accounts receivable isn't free. Here's what you pay:
Main Fee: Usually 1-5% of your bill amount. Better customers and faster payers mean lower fees.
Other Costs: Some companies charge extra for applications, wire transfers, or monthly minimums. Read everything before signing.
Volume Deals: Sell more bills and you often get better rates. Regular customers also get better deals.
Real example: You sell a $5,000 bill with a 3% fee. You get $4,850 right away and pay $150 when the customer pays. You get $4,850 now instead of waiting two months for $5,000.
Want to know if this makes sense for your business? Try our free money calculator to see exactly how purchase accounts receivable could help your cash flow.
When This Works Best
This money trick works great when:
- Your customers are good companies that pay their bills
- Customers take 30-90 days to pay
- You need cash more than every last penny
- You want to grow but need money first
- Chasing payments takes too much time
It's not good if customers pay quickly, your profits are tiny, or you mostly work with regular people instead of businesses.
Two Types of Protection
With Recourse: You pay back if customers don't pay. Costs less but riskier for you.
Without Recourse: The factoring company loses money if customers don't pay. Costs more but safer for you.
Most small businesses start with recourse because it's cheaper. Later, they might switch to no-recourse for big customers.
Getting Started
To begin, you need:
- Copies of unpaid bills
- Info about your customers
- Your business bank statements
- Proof you did the work
Most factoring companies care more about your customers paying than your credit history.
Don't Make These Mistakes
Don't sell bills with problems. Fix any customer complaints before trying to get cash.
Watch out for hidden costs. Get all fees in writing first.
Don't sell everything at once. Start small to test how it works.
Tell the truth about problems. Hiding stuff causes trouble later.
Making Smart Choices
Purchase accounts receivable can fix your cash problems and help you grow faster. The trick is finding the right company with fair prices and good service.
Look for companies that are honest about costs, treat customers well, and know your type of business. Talk to other business owners who use them.
This isn't just about getting money today. It's about finding a money partner for the long run. Pick right, and you'll have a great tool for handling cash problems and funding growth.
Ready to turn your unpaid bills into cash? Talk to our money experts today to see how purchase accounts receivable can give your business the cash it needs to succeed.
