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Accounts Payable Financing Should Be Used By Your Business

Aug 17, 2007
Accounts payable financing should be considered by your business because staying in good standings with your suppliers and creditors is extremely important to the survival of a business. Accounts payables are best described as money owed by a business to suppliers or creditors. Often times a business starting out will be short on cash flow, so they run the risk of paying their bills late.

Paying bills late can really harm your relationship with suppliers and creditors. These two groups are vital to your business because you need suppliers to have products to sell, and also you need creditors to have capital to expand your business and implement your business and marketing strategy. The other detrimental thing is that paying bills late can have a negative affect on business credit scores which means obtaining financing through a loan or other form down the road can prove to be extremely difficult. It is hard enough to get approved without business credit, but with negative business credit getting approved can be even more difficult.

It is wise to find some way to pay accounts payable on time. One option you may want to consider for your business is factoring. This is often times referred to accounts receivable factoring. This is basically where your business sells invoices or accounts receivables to a factor company who pays you a discounted rate for the invoices. By paying you for the invoices, your business would get access to immediate capital. This capital could be used to pay your suppliers and creditors either on time or early. It could even enable you to get discounts for paying early. The most important benefit is that it saves your business from any negative financial history.

Other options for getting the capital necessary to cover bills is to have a principal or owner in the company personally guarantee the loan. This may be last resort, but it is much better to do this and be able to pay the bills on time, rather than not being able to pay them on time. Negative credit feedback for a business can not only affect future financial options, but it can also increase interest rates on future loans or lines of credit.

Account payable financing is extremely important for your business, and should not be overlooked. One other thing to keep in mind is the importance of business credit, and how that relates to your business. You should look further into establishing positive business credit scores.
About the Author
BusinessFinance.com can help your business with accounts payable financing. They also have over 4,000 sources for capital in their business capital search engine which can be searched for free.
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