BizTerm Definition
Accounts Receivable Financing
Full Definition

Short-term financing technique for working capital purposes, loans to a company are collateralized by a security interest in a company's account receivables. The lender places emphasis on the credit quality of the company. This financing technique is the heart of asset-based lending industry. When account receivables serve as collateral, loans are made on a percentage of eligible assets pledged. A loan to value ratio of 70-90% is common. Ineligible accounts include those over 90 or 120 days past due, depending on the industry.

Previous Biz Term Next Biz Term