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You may have heard that factoring has a bad reputation. That it’s the small business loan of last resort for failing companies. Well, you aren’t failing. You just need more money right now to boost your furniture wholesale business. More money than you have on hand. Should you pursue accounts receivable factoring?

My advice is to learn more about it before you decide. There are so many myths out there about small business loan options. Since you want your business to grow, you must learn to separate myth from fact. And the fact is, accounts receivable factoring offers many advantages for a company like yours.

So let’s take a closer look at this type of small business loan. And talk about how and when this financing tool can work for you.


You sell your outstanding invoices to another company. That company is called a factor. How much they are willing to loan you depends on several factors. Investopedia explains: “In most cases, accounts receivables owed by large companies or corporations are more valuable than invoices owed by small companies or individuals. Similarly, new invoices are more valuable than old invoices. Generally, the easier the factoring company feels a bill is to collect, the more valuable it is, and the harder a bill is to collect, the less it is worth.”

The factor may lend you 70% to 90% of the total invoice value. The difference is their fee, since there is no interest involved. You get most of the money right away. When the factor collects from your customers, you get the remaining amount agreed upon.


Managing cash flow is one of the toughest things small business owners must learn. You have to manage incoming revenue from sales. And you have to manage outgoing expenses. That can be a tricky juggling act, because the two don’t always match up. You have to pay now for inventory, supplies, personnel, etc. But you have to wait – sometimes 60 or 90 days – for customers to pay you.

It’s easy to get caught in a cash squeeze. That’s when a small business loan can be so valuable. Especially accounts receivable loans. It’s as if they were created just to help smooth your cash flow.

Factoring is fast. You can be paid for your furniture as soon as it has shipped. There’s no lengthy, paperwork-ridden application process. You don’t need collateral. You get your money within a few days. No more time spent on collections. No more worries about when (or if) invoices will be paid. Here at United Capital Source, we typically advance anywhere from $5,000 to $2 million.

With an infusion of working capital right now, you can:

  • Stay current (or get current) on existing bills during a slow period
  • Cover planned expenses such as tax payments
  • Invest in more inventory
  • Purchase new equipment for your office or plant
  • Start a new marketing campaign
  • Invest more in new product development
  • Hire more people
  • Handle emergencies

Accounts receivable factoring is a great choice to fund any of these needs.

And did I mention it is an ideal choice if your furniture wholesale business has less-than-ideal credit? Bad credit doesn’t mean no credit. Not in today’s lending marketplace. Alternative lenders such as United Capital Source are here to help you get the money you need. Regardless of your bad credit. Accounts receivable loans are ideal because your credit history is irrelevant. The lender will be collecting from your customers. So they’re the ones that must be creditworthy.

Used wisely, A/R financing can also help repair your bad credit. There are no payments to boost your credit history directly. But smoothing your cash flow stabilizes your entire business. You’re demonstrating good cash management skills. And staying out of trouble when it comes to paying bills.

You can use accounts receivable financing as an ongoing cash management tool. For example, at UCS, we work with clients to finance new receivables at 1, 2, or 3-month intervals. Scheduling is tailored to your monetary and timing needs.

Note that some factors will also work with you to finance purchase orders. This can be a real plus, especially if you get an unusually large new order. You can get the cash you need to ramp up and fill the order on time.


The faster you can get orders in the door, filled and on their way, the more you can shorten your sales cycle to improve cash flow. Using industry-specific software for supply/inventory management and ordering can help with that. It also gives you better insight into other business management efficiencies. That will help you grow your business and make it more profitable.

Beware customers with credit problems of their own. You don’t want their cash shortage to become your cash shortage. That’s why Entrepreneur advises “one of the major mistakes a wholesale distributor should avoid at all costs is the overextension of credit to customers. This tends to occur when one or more of your customers demands extended payment terms on their invoices, yet your manufacturers are demanding their own payment terms on the other end.”

Also watch how much you sell to any one customer. At least until you are confident in their ability to pay you. Allowing one company to owe you too much leaves you over-exposed. One way to protect yourself is to set credit limits for new customers.


Give us a call here at United Capital Source, and let’s talk. Perhaps you aren’t convinced that accounts receivable loans are right for your business. And you may be right. Depending on what you need now, another type of small business loan could be a better choice. But at least you’ll know when and why selling your receivables can help your business grow.

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