An Accounts Receivable (A/R) PUT is a simple contract where a major bank agrees to buy specified accounts receivables at face value if the obligor files for bankruptcy.
A/R PUTS allow a Vendor to protect specifically against customers’ credit collapse, without affecting ongoing commercial relationships or regular payment processes. A/R PUTS also protect against the credit risk of a specific customer with potential credit or concentration issues, including distressed customers.
The Vendor pays a specified premium for credit protection on a designated amount of that obligor’s receivables during the contract term. A/R PUTS can be coordinated with other forms of receivables management, such as factoring or portfolio-based trade credit insurance. A/R PUT documentation is straightforward, based on standardized credit market terms. Coverage is available for public and liquid private companies.
A/R PUTS provide direct credit protection for underlying Accounts Receivable exposure, allowing the vendor to focus on what it does best - production and sales.
Tailored to the Vendor’s needs:
- Term - protection can be offered for various durations, from 6 – 60 months
- Size - protection can be offered for a scheduled amount $1 million to $100 million
- Obligors - protection available for most categories of receivable obligors (name specific)
- Protection Percentage – 100% of receivables insured
- Fast Payment – on same day of delivery of protected receivables
- Strong Counterparty – Major Global Bank
Flexible and Cost Efficient:
- No deductibles
- No cancellation provisions
- No limit reductions
- No need to insure entire Accounts Receivable portfolio
- No factor controls/intrusive procedures
- No notice to customer