Accounts Receivable Puts
Single or Distressed Customer Credit Protection:
You can sleep better knowing that you can protect your biggest credit exposures from bankruptcies. Accounts Receivable “Puts” may be able to accomplish that, even if there customer is already acknowledged to be in some financial distress.
Accounts Receivable “Puts” Explanation
A/R Puts can provide credit protection to cover your large credit risks with public companies, or large private companies if they have publicly traded debt, often even if they are already perceived as having financial problems. This protection can cover amounts from $500,000 (a practical minimum) up to $100 Million, for one to five years.
In a typical scenario, you would pay a fixed basis-points per month of protection, for the amount you wish to protect. If you are buying, say, $1 million of protection for twelve months, which enables you to turn that over every 60 days for a total of $6 million of sales, this method can be very effective in enabling you to increase your revenues.
The Accounts Receivable Put is an established alternative to credit insurance and factoring, and is a solution to the large risk you may not be able to otherwise cover. The Receivable Put provides a company the ability to “put” their unsecured trade claims to an institutional buyer, generally a large Wall Street investment bank, in the event of a customer bankruptcy or liquidation. In addition, the Receivable Put can be customized to meet a client’s unique needs, including the length of term.