Industrial Distribution recently got the chance to speak with Greg Kenepp, Chief Marketing Officer for The Receivables Exchange. The Receivables Exchange is an online marketplace for the sale of accounts receivable. The Receivables Exchange allows businesses to gain quick access to working capital by auctioning their invoices to a global network of institutional buyers.
Briefly describe the type of service The Receivables Exchange provides.
The Receivables Exchange is an electronic marketplace whereby a business can sell its receivables directly to a group of accredited buyers—community of banks, financing companies and factors—and receive cash for those invoices in as little as 24 hours.
The process is simple and efficient. First, upload the invoices you would like to sell. You can post as many or as few as you wish. There are no monthly minimums and no need to notify your customer that you’re selling their invoices. Second, set the Advance Rate you’re looking for and the Discount Fee you’re willing to pay. You can watch in real time as our private network of institutional buyers compete to purchase your invoices. Finally, choose the winning bid. In as little as 24 hours, the agreed upon advance will be wired into your account.
Why might industrial distributors be a good fit for this service?
Many industrial distributors are dealing with suppliers on one end who want quick payment for their products and customers on the other end who are extending payment terms beyond 30 days. This creates a cash flow problem. Unless the company has a sizable line of credit or cash reserves, juggling the gap between accounts payable and accounts receivable can stifle operations and prevent growth. The Receivables Exchange offers industrial distributors a cost-effective and flexible funding source to even out cash flow to meet payroll and operating costs, replenish inventory or add new product lines, and increase working capital to take advantage of supplier discounts and other opportunities.
How have recent economic conditions factored into the value proposition of a company like The Receivables Exchange?
Traditionally, small and medium sized businesses would turn to banks and use their receivables as collateral for a loan or line of credit. Unfortunately, in addition to high costs and strict lending requirements, it can take as long as 45 to 60 days before a business has its cash on hand. Asset based lenders such as factors are another financing option to use receivables to access cash, but business owners are faced with extensive and onerous requirements to “prove” their creditworthiness including personal guarantees, restrictive covenants, and long-term contracts among others.
With The Receivables Exchange, transactions are structured as open, competitive auctions, and bid upon by a global network of accredited institutional investors. This approach enables businesses to drive down their cost of capital and be assured they are receiving a competitive price. In fact, many of our sellers lower their cost of capital by 30%. Additionally, there are no personal guarantees, no customer notification, no all-asset liens, and no long-term contracts required. Businesses choose which receivables to sell and use the Exchange as often or as little as needed.
What tips do you have for distributors who are looking to grow but lack the access to capital?
Given the state of the lending climate, if a distributor is looking to expand, he should consider his financing options very early on. A large number of our sellers turned to The Receivables Exchange because they were ready to jump on a growth opportunity and their bank was unable or unwilling to extend them a line of credit or approve their loan. A business can look to cutting unnecessary expenditures, negotiating better terms with suppliers, reducing inventory, speeding up collections, and streamlining invoicing processes to improve their working capital position. When there is nothing left to squeeze from internal operations, The Receivables Exchange offers an efficient and cost-effective option for a company that wants to be ready for a growth opportunity.
For more information visit, www.receivablesxchange.com.