Accounts receivable financing provides liquidity using eligible customer receivables as the borrowing base or purchased asset. Facilities can take the form of a loan secured by receivables, an invoice discounting arrangement or a true sale of receivables.
How does Accounts Receivable Financing work in practice?
The business reports eligible customer invoices and the provider calculates availability under the facility. Depending on the structure, the receivables secure a loan or are sold. Customer collections reduce the financed balance or replenish availability. Eligibility, concentration, dilution, disputes and aging determine how much of the ledger can support funding.
What records support Accounts Receivable Financing?
Maintain the receivables ledger, aging, eligibility tests, borrowing-base certificate, advances, collections, disputes and dilution adjustments.
What does Accounts Receivable Financing not establish?
The available amount can fall quickly when invoices age, customers become concentrated or credits and returns reduce collectible balances.
