Is It Safe?
The answer to this is yes because every venture capitalist firm that offers this type of receivable financing takes a detailed look at your customers, their credit worthiness, and how reliable their payments are. If you have a bunch of deadbeat accounts receivables, a venture capitalist firm won't consider them as viable.
For example, if you purchase an existing business and have $50,000 in accounts receivables, take a good look at those receivables before you consider this option. Is there truly $50,000 there or are some receivables so old you may never recover them or be paid? If you analyze your receivables and of that $50,000, you determine only $25,000 will be honored, this may not be a good idea for your small business. Venture capitalist firms who fund accounts receivables often charge up to seven percent interest, a fee often higher than a conventional loan to fund your business and cash flow.
If you do find you have receivables that can be collected, keep in mind that venture capitalist funding in this way should be considered a short-term cash opportunity, not long term. The venture capitalist firm will more than likely want monthly reports from you on how those debts are coming along and if they aren't coming through, they may demand the funds they loaned you back in full along with their fees.