A receivables purchase is a transaction in which a finance provider buys payment rights arising from invoices or other trade receivables. The seller receives cash before maturity, while the provider collects or receives the assigned payment at the agreed date.
How does Receivables Purchase work in practice?
The seller identifies receivables for sale and the purchaser checks their eligibility, supporting documents and debtor risk. On purchase, the seller receives the agreed price, less any discount, reserve or holdback. The agreement determines whether the purchaser assumes the debtor’s credit risk and which disputes, dilution or breaches remain with the seller.
What records support Receivables Purchase?
Record the receivable sold, purchase price, discount, representations, assignment, notices, collection account and repurchase events.
What does Receivables Purchase not establish?
Legal sale treatment and risk transfer depend on the agreement and jurisdiction. The commercial label alone does not establish either.
