How it works
Receivables financing commonly provides credit secured by qualifying invoices. The lender uses an advance rate against eligible receivables to determine availability. Invoices can become ineligible because of age, disputes, concentration, or other agreement rules.
Where it can fit
A business with reliable commercial customers may have valuable invoices but insufficient cash until customers pay. Receivables finance connects borrowing capacity to that operating cycle. It is distinct from simply taking a term loan based on annual revenue.
Look closely at the trade-offs
An invoice balance in the accounting system is not the same as an eligible borrowing base. A large late customer can reduce availability exactly when cash becomes tight. Confirm lockbox arrangements, reporting frequency, audit rights, and how collections reduce debt.
Your next-step checklist
- Detailed receivables aging
- Customer and invoice eligibility
- Existing liens on receivables
- Weekly or monthly reporting capability
Crack this combination.
What determines available borrowing capacity?
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Sources & further reading
This file draws on the following references. Product availability and requirements must be confirmed with the provider.
Levr: accounts receivable reportsLevr: loan types