Account Receivable finance aim to extend the power of early payment to companies.
Excerpt from an original article by Julie Erwin in Supply Chain Brain. (link to original article below)
The current economic landscape has put a significant strain on cash flow for companies of all sizes. Some are experiencing unexpected surges in demand, and are struggling to keep pace. Others are dealing with the aftermath of factory closures, heightened safety requirements, or a decline in orders. Either way, companies must simultaneously balance today’s needs while preparing for any future requirements — and that requires cash.
Growing demand for liquidity and timely payment across the supply chain is driving record interest in alternative financing solutions. Companies are looking for ways to monetize their liquid assets and unlock cash trapped in the financial supply chain. One option is accounts receivable finance, which allows companies to sell their invoices to financial institutions for faster payment. It’s an attractive option for companies that seek new ways to improve cash flow.
It offers competitive pricing and flexibility for companies to advance payment on their accounts receivable. Advantages include:
Flexibility and control at a competitive price.
Selective receivables finance allows businesses to choose which invoices to submit for early payment based on their own unique business needs. This option typically targets the company’s largest customers, unlocking more liquidity faster. Because it takes both the company and its customer’s credit rating into consideration, interest rates and financing fees are generally much more competitive than other solutions.
Especially for mid-market companies who may not have the leverage or credit rating to secure other unsecured financing options, and are limited to secured debt such as commercial or asset-based lending, selective receivables finance is an accessible, hassle-free solution to unlock cash.
When properly implemented and disclosed, selective receivables finance transactions do not count as debt on the balance sheet. These transactions are a true sale of receivables — not a loan — meaning there is no risk of reclassification, and no negative impact on debt ratio or other outstanding lines of credit.
As we continue to navigate the current challenging economic climate, companies of all sizes need new ways to increase cash flow that don’t have a negative impact on the balance sheet. New innovations under the umbrella of accounts receivable finance aim to extend the power of early payment to a broader audience, at a competitive cost and with greater flexibility.