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Getting the Most from Your Accounts Receivable Financing

Accounts Receivable Financing

By: LiquidX

Every business owner knows you need working capital to not only run, but also grow a company. Between paying your employees, paying rent and investing in new projects and possibly markets, you need positive cash flow to thrive. 

One of the challenges companies face as they manage their finances is getting invoices paid immediately by customers. And sometimes corporates have multiple customers simultaneously asking to extend their payment terms, which can even further widen the cash flow gap. This disruption can be daunting to businesses looking to remain more resilient among the turbulence. 

Many companies turn to accounts receivable (AR) financing as a solution. With AR, you’re able to speed up your business’ cash cycle and reduce the days sales outstanding (DSO).

Accelerating Receivables to Build Stability

Accounts receivable financing is an alternative form of commercial finance giving business owners access to working capital fast. AR works by selling unpaid invoices for cash advances. The process follows the following flow:

  • Corporate launches a transaction to selected banks and uploads receivables onto a comprehensive trade finance platform.
  • Banks purchase assets from the platform in a true sale.
  • Corporate collects funds from buyers and remits funds to banks via the platform.
  • Banks remit funds to the platform, and the platform remits to corporate the same day.

Your accounts receivable are a current asset and considered liquid since they can be used as collateral to secure a loan to help meet short-term obligations. Remaining liquid is critical for businesses to be able to either pounce on opportunities as they arise or survive unforeseen economic downturns.

Accelerating receivables not only improves reserves, but it can also be structured for beneficial treatment by achieving off-balance-sheet status, debt-free. In certain circumstances, receivables financing can facilitate new sales where the customer’s buyers may have reached purchasing limits.

When mapping out your AR strategy, simply implementing a system without any sort of guidance will not sustain your business. Navigating structuring and having access to asset distribution technology and a solid funder network are all key elements for success of the process. Companies get the most out of their accounts receivable financing when they work with a company like LiquidX that has the expertise and resources to adequately manage it. 

LiquidX Simplifies Accounts Receivable Financing

LiquidX offers a complete front-office trade finance solution in InBlock Trade. It enables corporates to originate and distribute accounts receivable, payables, inventory and asset-backed finance transactions across any transaction type. Our industry-leading platform facilitates early payments, improves working capital and mitigates risk in working with multiple funders. 

InBlock Trade converts manual processes into automated ones, enabling you to focus on higher level initiatives better suited for your time. In streamlining this process and moving to a single platform, you’re also able to cultivate transparency between your company, your customers and financial institutions. These benefits not only improve efficiency, but boost the overall effectiveness of your AR program as well.

A major pharma manufacturer was planning on making a series of large acquisitions in a short time frame. They considered various forms of funding, but most options were either cost prohibitive, time consuming, or both. With LiquidX, they were able to access $300 million of accelerated cash in 60 days without arrangement fees and at a rate on par or better than their public debt.By leveraging better technology within the industry, your AR program can bring similar success to your business. LiquidX is a leading global fintech platform empowering customers with the most comprehensive and straight-forward solutions in trade finance. To learn more about our industry-leading origination and distribution technology, request a demo.