Bulk Sale of Accounts Receivable
A bulk sale of accounts receivable is a method of off-balance sheet financing used by companies to turn accounts receivable into cash. It is a one-time or periodic outright sale of all or a portion of your company's accounts receivable to CIT Commercial Services.
When can companies benefit from a bulk sale of accounts receivable?
Companies of all sizes use this innovative financing technique. Each bulk sale arrangement is customized to the company's specific needs. Transactions can be structured and documented quickly.
Here are a few examples:
- Alternative to asset securitization
- Substantially lower legal expenses as compared with a securitization
- No need to set up a special-purpose, bankruptcy-remote company
- No need to have your portfolio rated
- Low minimum transaction sizes: CIT can purchase as little as $10 million of your accounts receivable at a time—far less than what would be economically feasible for an asset securitization
- Can be done one time or on an ongoing basis
- Confidential: there is no need to notify your customers
Satisfying Bank Requirements - An unsecured borrower could sell a portion of its accounts receivable to meet the clean-up or clean-down requirements specified in its bank loan agreement
"Stand Alone" Financing Technique - U.S.-based subsidiaries of international companies use this to finance working capital requirements while maintaining the deductibility of interest expense
Off-Balance Sheet Financing - Off-balance sheet financing can be used by public companies to show a more liquid and secure financial position on financial statements. The leverage ratio often translates into a higher stock valuation.
Clean Acquisition - Prior to an acquisition, the outstanding accounts receivable may be sold to CIT. The bulk sale can help reduce the borrowing needs of the buyer at closing. CIT will provide a full accounting to the buyer and seller for post-closing adjustments.
Bridge Financing - Bridge Financing can be used to fund cash shortfalls that may occur during financial restructuring or the due diligence phase of a company's conversion from an unsecured to secured lending facility.