Receivables finance is an underutilised financing arrangement for SME’s. Using the unpaid customer invoice after goods and services have been delivered, the SME can convert the invoice to immediate cash, through what was called debtor finance.
For the financier, the customer invoice potentially provides an IOU from a more credit worthy client than the SME, and shortens the cash conversion cycle, so that the SME recovers their capital earlier and is able to produce more. For a small fee, the SME gets predictable cash flows and does not feel powerless to negotiate terms with a larger corporate.
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