Receivables Financing – possible solutions

Receivables Financing – possible solutions

Most global multinational companies and/or large corporates sales team want to extend longer credit and higher amounts to their customers while their treasury teams are looking at risk management solutions to manage their DSO. Most banks and fintechs have been able to offer various receivable structures to their corporate clients to help achieve the same.

One of the common structures being offer by banks/ fintechs to corporates is financing a portfolio of receivables compromising of a number of debtors. In these structures, banks/ fintechs usually extend funding for around 90% of portfolio and want corporate clients to give a back-stop guarantee for the balance 10% (usually as first loss guarantee).

While in some countries, the GAAP accounting permits the seller (i.e. corporate client) to provide for the first 10% and still receive off-balance-sheet treatments, however, under IFRS and others, they don’t.

Pinnacle Trade Finance can introduce corporates to various providers of first-loss-demand-guarantee (FLDG) to help corporates unlock the liquidity in their receivables portfolio while at the same time get off-balance-sheet treatment as well. If the proposed structure works for the corporates and acceptable to their accountants, there is potential to scale-up in size.

In addition, Pinnacle Trade Finance can help corporates to diversify the liquidity provider for the overall portfolio receivables financing structures as well by introducing corporates to other banks plus institutional investors who find these structures attractive.