Managing a business in today’s environment isn’t easy, and growing a business can be even more challenging. Having cash flow helps make it possible. If you recognize the value of having your customers pay in cash at the time of service, then an Accounts Receivable Line of Credit and having First Mid as your partner may be the answer.
How can an AR Line of Credit help?
You’ve heard the saying, “It takes money to make money.” It also takes customers to grow or maintain a business. But how do you stay current on expenses when customers are waiting 30, 45, or even 60 days or more to pay you? That’s how an Accounts Receivable Line of Credit can help.
By receiving an advance on the invoices owed by your customers, you receive immediate cash to operate your business. And, it allows you to maintain your image without having to bother your customers for a payment each week. Your customers want time to pay, and with an AR Line of credit, you can allow them the time they need – because cash flow is important to them, as well!
Rodney Morris, Vice President at First Mid, has been helping businesses with this special line of credit since 2005. He says, “This is something very few banks offer. We specialize in helping our customers succeed and this service has helped many people over the years.”
“Utilizing a line of credit at First Mid has allowed us to take advantage of discounts on material and have consistent cash from our work. We banked with First Mid several years ago and came back because of their ability to meet the needs of our mechanical insulation business. They are great to work with.” – Chris Lyles, Central Services
How does the AR Line of Credit work?
When you create an invoice, you send a copy to the bank for an advance the same day. When the customer pays you, the payment is sent to a lockbox (at the bank) and then applied to your line of credit. It’s simple and easy – with convenient online access to specialized software that allows you to submit information, retrieve reports, and stay current on all payment activity.
“First Mid looked at my company and recognized how their Accounts Receivable service could assist my business. First Mid has been instrumental in helping Micro Tek succeed. I’m fortunate to have them on my team.” – Robin Shively, Micro Tek Pattern Inc.
What is the cost for the service?
The cost is based on the average length of time it takes for your customers to pay, and it is generally less than the cost of receiving payment by credit card. Morris said, “We analyze each business and their activity independently. The fee, rather than interest, is a percentage that reflects the characteristics of the customer activity for each business. Most businesses will pay between one and three percent for having the money in 24 hours, which is similar to traditional discounts that many businesses offer to encourage their customers to pay in 10-14 days.”
How does an AR Line of Credit differ from other types of financing?
An AR Line of Credit is a blended product with characteristics of both local banking and some aspects of factoring. Similar to traditional financing, the relationship with the bank is hidden from your customers. The only difference is the payments made to you are sent to a lockbox at the bank for processing. Similar to factoring, the fee is a percentage of the gross invoice, rather than an interest calculation on an outstanding balance. AR lines of credit generally offer higher borrowing amounts as factoring lines would, but at lower costs than factoring. Similar to local banking, you maintain responsibility for follow-up and customer payment on the accounts receivable line. The bank does not process billing or regularly contact your customers for payment like a factoring company would.
“There is nothing better than our line of credit with First Mid. We get an advance on our invoices and there is no waiting on money for cash flow. We have the money in our account right away so we can keep rockin’ and rollin’ with our business.” – William Rexing, W.M. Rexing Trucking Inc.
What are some other benefits of an Accounts Receivable Line of Credit?
By always having immediate access to cash, you’ll have the money to pay expenses timely and to take advantage of discounts for paying sooner. With an AR Line of Credit, you can continue to quote new projects and take on more work that may not pay you immediately. You will also gain access to advice and assistance from a bank that has timely information to help you evaluate your business activity. Morris adds, “We view our relationship with each of our business customers as a partnership, and serve as an extension of the business by providing information to help them make decisions. It is rewarding to help customers grow, improve their margins, and to see the value they gain from the bank’s help.”
“We have grown our business tremendously since working with Rodney and First Mid. Our line of credit has allowed us to take on larger and more jobs because we have immediate cash. We wish we would have started using this service sooner.” – Jessica and Daniel Mull, D & D Tire Service