Accounts receivable financing,
Definition of Accounts receivable financing:
Accounts receivable (AR) financing is a type of financing arrangement in which a company receives financing capital related to a portion of its accounts receivable. Accounts receivable financing agreements can be structured in multiple ways usually with the basis as either an asset sale or a loan.
Using amounts owed by customers as collateral in raising a secured short-term loan on a one-time or on a continuous basis. In case of a default, the lender has the right to collect receivables directly from the named debtors of the firm. It is a type of off balance sheet financing. Also called pledging of accounts receivable. See also discounting and factoring.
Accounts receivable financing is an agreement that involves capital principal in relation to a company’s accounts receivables. Accounts receivable are assets equal to the outstanding balances of invoices billed to customers but not yet paid. Accounts receivables are reported on a company’s balance sheet as an asset, usually a current asset with invoice payment required within one year.
How to use Accounts receivable financing in a sentence?
- Accounts receivable financing deals are usually structured as either asset sales or loans.
- Many accounts receivable financing companies link directly with a company’s accounts receivable records to provide fast and easy capital for accounts receivable balances.
- Accounts receivable financing provides financing capital in relation to a portion of a company’s accounts receivable.
Meaning of Accounts receivable financing & Accounts receivable financing Definition