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Receivables Finance

Receivables Finance allows a corporate to reduce cash trapped in their accounts receivables balance, improve profitability and reduce leverage through the sale of part, or all, of its receivables. The programme may achieve accounting deconsolidation of receivables, subject to review by the company’s auditors.

A seller would communicate the outstanding balance of their receivables ledger to the funder/buyer, who finances a percentage or the full amount of receivables available by selecting invoices from specifically identified buyers

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How does it work?

Receivables finance programmes are based on the sale of some or all receivables to a funder or SPV, governed by the terms set in the Receivables Purchase Agreement (RPA). The amount of funding is based on an agreed advance rate, which is in turn based on the total balance of eligible receivables and debtors in the portfolio.

The sale of receivables, and associated rights, can be structured with or without recourse to the company, and collections from underlying debtors can continue to be made either to the company’s accounts or directly to the vehicle or funder, depending on the agreed structure.

Benefits

Improve cash collection and reduce DSO

Access alternative source of funding

Improve liquidity position

Potential for reducing leverage

Typically uncommitted

Not involved in cash collection

Success factors

When setting up a receivables financing, it is important to ensure certain receivable and portfolio characteristics are met, which can vary by funder type and structure deployed. Automated reporting through our platform reduces operational risk and enables multi-funder arrangements.

Size of debtors

Choosing a few large debtors, or the full portfolio, is a strategic decision

Quality of debtors

The portfolio should be based on a debtor book that is of reasonable quality

No receivable restrictions

The Receivables should be unencumbered and free of any restrictions on a sale or transfer, including debt covenants and receivable contract restrictions

Thought leadership