Loan / Advance Against Receivables

Sellers use their receivables as security to obtain cash advance from a Funder. This allows the Sellers or Buyers to optimise their working capital by obtaining funding against their receivables.  A loan or advance against a portfolio of receivables helps to bridge the gap between point of delivery and point of receiving cash for the sale of various goods.

A loan or advance against a portfolio of receivables is normally structured under a loan agreement between the Funder and the Seller.  Most often, this structure is not a ‘true sale’, meaning the title to the receivables remain with the Seller and recourse remains. The Funder will use the expectation of the receivables being converted to cash as a collateral for the cash advance.

Funders may choose to establish a borrowing base to regulate the amount of cash advanced in respect to potential dilutions or late payments from the end customer.

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