There are several methods for managing the credit risk of accounts receivable, which include credit insurance, credit protection, non-recourse factoring and selling the accounts receivable outright.
Credit Insurance: The extent to which your company utilizes credit insurance to manage your accounts receivable portfolio will depend on: (1) the credit profile of your customers, (2) the concentration of your largest customers relative to your total sales, (3) your company's equity capital cushion and (4) your accounts receivable management resources.
Non-recourse Factoring: The attractiveness of non-recourse factoring is that your firm shares the risk with the Factor, possibly benefiting relative to selling the accounts receivable outright, yet limiting your company's maximum loss exposure. The downside is that your maximum exposure (that is, the amount of the reserve fund) most likely is more than the discount from selling the accounts receivable outright. If the client pays the account receivable within a certain amount of time, the remaining amount of the reserve fund, after the Factor's fee is paid, will be released to your company.
Selling Large Balance Accounts Receivable: Companies that have the opportunity to sell their products in quantities of at least $500,000 can consider the sale of individual accounts receivable. This is particularly attractive when your prospective customer is in Chapter 11 or otherwise not an acceptable credit risk, permitting your company to sell products to a company that otherwise would not be acceptable.
Deschutes Capital appreciates the opportunity to explain our corporate financial services. We can save you time and money and allow you to focus on running your business. Whether you need to reduce your maximum loss exposure or need to reduce your overall loss exposure, contact Deschutes Capital today.
Benefits:
Proper management of accounts receivable credit risk can provide sufficient protection to: (1) reduce losses, (2) increase profitability (3) accelerate cash flow and (4) permit the expansion of your sales.
Next Step:
To explore our full range of services, click above at left on the corporate financial service which is of interest to your company. To discuss financing alternatives or for additional contact information, click on the Corporate Finance Inquiry at the bottom of this page to complete and submit the secure request form. An account executive will contact you.
Financial service companies that are among the best in their market sector are welcome to click on the Add Us To Your Resources Database at the bottom of this page to complete and submit the secure request form.
Companies and individuals who service middle market companies and would like to submit referrals to Deschutes Capital should click on the Affiliates Program & Referral Network at the bottom of this page to complete and submit the secure request form.
