Examples of Accounts Receivable Financing

#1 - Manufacturer:
A manufacturer is experiencing a cash crisis. Orders are OK, but a slow economy results in customers taking over 40 days to pay. To get a good price on raw materials, manufacturer must pay COD.

Solution:
The manufacturer obtains Accounts Receivable Financing. He sells invoices to the lender and receives payment within 48 hours. Later, when lender collects from customer, lender remits balance to manufacturer. Manufacturer benefits from quick cash in hand and uses his bank lines for other things.


#2 - Importer/Wholesaler:
An importer/wholesaler uses his bank lines to keep inventory on hand. Unfortunately, slow paying customers result in a cash crisis which jeopardize payments on the bank line.

Solution:
The importer/wholesaler obtains Accounts Receivable Financing. Lender provides quick cash through purchase of invoices. Customer remits payment to lender and lender settles up with importer. The importer/wholesaler has a smooth cash flow and pays his bills on time. This improves his credit rating and his bank offers to increase the credit line.


#3 - Government contractor:
A manufacturer was happy when he received a large contract from the government for nuts and bolts. After he shipped the first order, he received a shock... he knew the government was good for the money, but he learned from first hand experience how government bureaucracy moves very slow. The manufacturer was in a panic because it took over sixty days for them to pay!

Solution:
The manufacturer obtains Accounts Receivable Financing. The lender provides quick cash through purchase of invoices. The manufacturer appreciates the government contract and can now sleep well as he knows more government sales will follow.


#4 - Medical clinic:
The same old medical story... insurance carriers take 60 days to pay on claims. This results in the usual cash crunch... no funds to pay bills, taxes and salaries. The doctors are tired of applying for bank loans or asking to increase their credit line.

Solution:
The clinic obtains Accounts Receivable Financing. The lender provides quick cash on medical receivables. (Amount advanced is based upon carrier’s approved payment rate.) Lender also offers to clean up old billing errors, then pay advances on that. The business manager is happy the bills get paid and there is less clerical work. The doctors are happy that the business manager doesn’t bug them.

Return to top