The Receivables Exchange Reports 66% Growth of Online Receivables

The Receivables Exchange, the world’s first online marketplace for real-time trading of accounts receivable, announced today that its market-based working capital solution experienced 66% month-over-month growth in receivables sold in March 2010. Data shows a higher rate of adoption by small and midsize businesses that are freeing up cash at an average of ninety-eight to ninety-nine cents on the dollar. 

A new B2B finance report by Morgan Stanley addresses the disproportionate burden that most small and midsize companies are facing as they work to fund their businesses in the new “cash is king” economy.  Morgan Stanley indicates the sale of accounts receivable as one of three viable credit solutions and features The Receivables Exchange as a new capital market to optimize financial performance, increase liquidity and fund growth, without the constraints and high costs of traditional financing. In 2009, bank commercial lending declined more than 24% leaving a dearth of funding for SMBs. The report suggests that small businesses are delaying business investment on the supposition that there is an overall lack of business credit, ongoing marketplace uncertainty and that they are not taking advantage of alternative funding.

Most businesses wait an average of 58.91 days before being paid by their customers and have more than 60% of their working capital tied up in outstanding invoices, creating a working capital tug-of-war and restricting growth. As the Morgan Stanley report indicates, by trading receivables on The Receivables Exchange, companies can reduce their - days sales outstanding (DSO) from more than 50 days to as little as one day, increase their cash conversion cycle (CCC) and improve financial performance.

“Cash flow constraints can slow down an entire business line and significantly hamper growth,” said David Menard, president of Ramard, Inc., a Florida-based manufacturer and a Seller on The Receivables Exchange. “We have to pre-pay our distributors. Without access to capital we are unable to distribute products and meet our demand. With The Receivables Exchange, I get affordable access to capital. We make the discount back ten times over on increased production just from the sale of one auction.”

The Receivables Exchange Q1 data indicated that 75% of sellers on the Exchange became repeat customers with an average auction size of $50,000. The Exchange has Sellers in 49 states and 42 industries. Industries with high activity levels included wholesale and distribution, professional services, business support and manufacturing, which accounted for more than 25% of the activity. While most auctions on the Exchange last one day, the shortest auction of record closed in only 4 seconds. Sellers on The Receivables Exchange have more than $14 billion in accounts receivable inventory; TRE Buyers have more than $20 billion in Buyer liquidity.

“Small and midsize businesses deserve the same access to a flexible, affordable source of capital to fund their businesses that large-cap companies get,” said Justin Brownhill, co-founder and chief executive officer of The Receivables Exchange. “The positive response to our transparent online marketplace indicates that receivables financing, when delivered in an open and competitive market, provides an efficient and compelling way for SMBs to optimize their working capital management and drive company growth.”

Benefits of accounts receivable financing through The Receivables Exchange include:

  • Increased Liquidity: Access to cash in as little as 24 hours
  • Complete Control: Companies set all auction parameters, including minimum advance, maximum fee and auction duration.
  • Lower Cost of Capital: Competitive real-time bidding drives down cost
  • Improved Debt Position: Receivables are sold as an asset versus traditional lines of credit, which are balance sheet liabilities
  • Less Restrictive: No all asset liens, restrictive covenants or personal guarantees
  • Key Financial Benefits: Decrease Days Sales Outstanding (DSO), increase liquidity ratios, enhance ROE

The Receivables Exchange serves as a transparent, efficient capital marketplace for small and midsize businesses to gain access to affordable capital. Learn more about how companies are improving cash flow by financing accounts receivable at www.receivablesXchange.com.

1Source: Wall Street Journal, average length of Days Sales Outstanding (DSO’s) of U.S. companies under $500m in revenues.