Accounts Receivable Financing
Under accounts receivable financing, a company obtains a short-term credit facility using its accounts receivables as collateral. The business remains responsible for collecting on its accounts receivables.
EXAMPLE: Accounts Receivable Financing
A company based in Central America that specializes in the processing and trading of sesame seeds approached IIG to finance its sales in the US and Japan. After thorough due diligence, the firm extended a revolving facility to this client.
- IIG only made advances against pre-approved off takers to whom a notification letter (document in which the off takers agree to pay into the collection account) was sent and acknowledged.
- IIG made cash advances to the borrower against a percentage of the final commercial invoice and bill of lading ("B/L").
- IIG was repaid at the maturity of each individual transaction. All payments flowed through the collection account controlled by the firm in accordance with the terms defined in the invoice.
- The maximum payment term for each transaction was 60 days from B/L date.
- Funds repaid could be re-borrowed depending on the availability under the revolving credit facility.