Accounts Receivable Financing
Accounts receivable financing is a revolving line of credit based upon the accounts receivable of the borrower. By financing accounts receivable, a firm can speed its cash flow to meet current obligations without monthly repayment of principal or periodic out-of-debt requirements. As cash needs vary, the borrower is able to increase or reduce the loan amount without renegotiation, and the ability to borrow grows directly with accounts receivable.
A typical program enables a client to borrow a predetermined percentage, (usually 80%), of accounts receivable under an established line of credit. The client receives periodic advances, upon request, deposited directly into his bank account. If funds are not drawn, the loan balance will be reduced through collections, thus minimizing interest cost. Interest is charged on funds advanced, not the amount of sales assigned.
Accounts receivable loans can be on a non-notification basis; so our clients customers are not notified of the financing. Collections continue to come directly to the client to insure customer relations are not disturbed. Deposits are handled with a coded endorsement to further insure confidentiality.