Receivables Funding

If your business wins a large contract, you may need to make initial investments such as purchasing new machinery, cash-flowing increase in staff wages or moving to larger premises. Receivables funding allows early release of cash against future contractual income.

Receivable funding is a type of business funding in which businesses sell their accounts receivable (invoices) to third-party funders at a discount. In other words, companies can get paid immediately for the goods or services they have already delivered without waiting for their customers actually to pay the invoices.

This can be a great way to improve cash flow and keep your business operating smoothly. Receivable funding can also be used to finance expansion or other major projects. If you're considering using receivable funding for your business, it's important to shop around and compare offers from different lenders. Be sure to read the fine print carefully to understand all the terms and conditions. And always remember that receivable funding is a loan, so you'll need to repay the funds plus interest and fees over time. But if used wisely, receivable funding can be a helpful tool for keeping your business running smoothly.

On day one of the agreement, the lender advances a percentage, or even the whole, of the total income expected during the contract term.

e.g. Company A has a contract with institution B to provide goods or services over five years, paying £1 million per year. Total contract value £5 million.

The lender advances £4 million on day one, to be repaid over the contract term. The loan is secured on the contract itself.

The capital released may be used for any legitimate business purpose, including expanding the company’s staff and infrastructure, thus enabling it to take on and fulfil the said contract.

Receivable funding is one form of many cash flow finance solutions available that could be used to meet immediate business needs. For more information on the different cashflow funding options on offer and receive a no-obligation discussion or more information, call our enquiry team on 0800 0869404; we’ll be happy to help.

Here at Love Finance, we are business finance specialists. Any company needing finance to help grow their business and flourish can talk to us about arranging the money they need to take the next step.