Accounts Payable Financing with American Express
While a stockpile of outstanding invoices might look nice on your financial statements, you can’t exactly pay your bills or take advantage of new opportunities with your account’s receivables. To grow your business, you need access to cold hard cash—it’s that simple. Factoring is an option, but is it really the one you want?
Though they need funds, many businesses are hesitant to take out loans for several reasons. Maybe they don’t want to incur debt, don’t want to put up collateral, or don’t have the time to endure a drawn-out application process, among other things. As a result of this loan aversion, some business owners turn to legacy invoice factoring services to get the money they need.
Quite simply, factoring is the process through which businesses sell their accounts receivables to third parties. While factoring can certainly help companies overcome short-term cash gaps, there are several reasons why the financial tool is less than optimal:
Factoring is expensive
First things first: The average factoring company charges anywhere between 28% and 60% APR. On top of that, factoring companies generally advance somewhere between 70% and 85% of the cost of the invoices. So, in addition to incurring hefty fees, you also lose immediate access to a significant chunk of your receipts.
2. It can be embarrassing
When you partner with a factoring company, that organization owns your invoices. This means that your customers will repay the factoring company directly—not you. The factoring company also handles collections, so it brings your cash flow struggles right out in the open for everyone to see.
3. Your business loses agility
Many factoring companies are keen on locking their customers into long-term contracts. Even if you’ve grown your business and are ready to move on, the factoring company may want to keep its tentacles in you longer than you’d like.
There’s good news:
Instead of paying more than you need to pay in order to regain control of your finances, you can do the reverse of factoring with an accounts payable service like American Express Working Capital Terms to solve your cash flow problems and take your business to the next level. With American Express Working Capital Terms, you won’t have to worry about hurting your reputation, digging into cash reserves or relinquishing any control of your operations.
Here’s how it works:
With your American Express Business Card (Open) enroll for Working Capital Terms account. Once enrolled, easily add vendors by providing their business and bank information. For your protection, we may need up to an additional 2 business days to verify the vendor information you provide. Select a vendor from those you’ve added and tell us how much you want to pay them. Take your pick of a 30, 60, or 90-day term with a corresponding fixed fee starting at 0.5%, 1.0%, or 1.5%. They send payment to your eligible vendor via ACH within 2 business days and make it clear the payment came from your business. The amount you requested plus your fixed fee is auto-debited from your bank account at the end of the term. Request to pay as many eligible vendors as you want, as many times as you want up to your available borrow amount.
American Express costs are extremely reasonable—just check out our transparent pricing policy. They don’t get between you and your customers, and they will never tell you how to run your business. If you’re in need of a cash infusion, there’s no sense in sacrificing any more money than you absolutely must in order to get the funds you need to grow your business. Thanks to American Express, you won’t have to.
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