Accounts Receivable Financing

Description of Accounts Receivable Financing. Explanation.

Definition Accounts Receivable Financing. Description.

Accounts Receivable Financing is obtaining funds via a loan by using a company's accounts receivable as a collateral. Normally, the company that "sells" its accounts receivable receives less than the full amount for the money owed on the accounts.

The main benefit of this approach is that the funds are obtained now rather than later. But credit risk is not eliminated.

This form of financing uses accounts receivable as collateral for a loan. This is different than factoring in that the party providing the financing does not own the invoice and is not responsible for collecting the debt.

Compare with: Factoring

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End of description Accounts Receivable Financing. An explanation.