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Open account trade in which the seller relies upon settlement of their sales invoice represents the majority of global mercantile flow. A financier that is able to provide a solution which enables the seller to extend competitive trade credit terms to the buyer without detriment to their cash flow, and which is scalable as sales grow, can gain additional clients and generate significant revenue streams.
In this chapter, the evaluation of risk is described and the importance of the aged debtor list and credit note history. Key aspects which determine the appropriate financing structure such as disclosed and undisclosed debt purchase facilities, formulation of the prepayment financing percentage, funding limit, rights of recourse, capture of the receivable and the importance of ‘true’ sale for balance sheet de-recognition are discussed.