Receivables Financing

Form of Asset-Based Lending providing seasonal capital to businesses, collateralized by accounts receivable. Receivables loans, like inventory loans, are sources of short-term funds that are used for a variety of purposes, such as financing a business expansion. Receivables are a better form of collateral than inventory from the lender's viewpoint; they demonstrate that the firm has buyers. Receivables are more liquid than inventory; they are one step closer to cash. A lender's primary risk in receivables financing is that the borrower will divert collections away from repayment of the loan. See also Borrowing Base.