Receivables finance allows a business to access funds tied up in customer invoices. When a company sells goods or services on credit, the amount due becomes a receivable-an asset on the seller’s books and a liability for the buyer. Rather than waiting 30, 60, or 90 days for payment, the seller can receive early funds from a financier.

This accelerates cash flow, reduces the need for working capital and improves operational efficiency. Key metrics involved include:

DSO (Days Sales Outstanding): How quickly the seller turns receivables into cash.

DPO (Days Payable Outstanding): How long the buyer can delay payment without penalty.

Receivables are created every time a business sells a product or service on credit. In a typical supply chain, raw materials may pass through multiple hands-each sale generating a receivable. These receivables can be financed at any stage, offering liquidity for both upstream and downstream partners.

This is why receivables finance is central to many trade finance strategies - enabling businesses to fund production, manage cash flow and support growth at every link in the value chain.

The strength and reliability of a receivable plays a critical role in determining how-and whether-it can be financed. Finance providers often seek credit enhancements such as buyer guarantees, credit insurance, or irrevocable payment commitments like promissory notes or payment undertakings. These reduce the risk of non-payment and improve the attractiveness of the receivable as a financial asset.

Receivables backed by clear payment obligations are more valuable and easier to fund. The closer a receivable is to being an unconditional promise to pay, the more financing options become available. In contrast, if a seller still has performance obligations to fulfill, some funders may hesitate to extend financing or may price in more risk.

Timing also matters: receivables with shorter maturity periods-like 30 days-are typically more favorable for funding compared to those tied to long production or shipping cycles.

Improved Cash Flow: Get paid faster without waiting for customer payments.

Outsourced Credit Management: Some providers handle your sales ledger and collections.

Risk Mitigation: Funders often conduct due diligence on your customers and may offer credit protection.

Confidentiality Options: Solutions like confidential discounting keep financing arrangements private.

Supports Growth: Free up working capital to fulfill larger orders and expand operations.