Trade Receivables

A company’s trade receivables are its accounts receivable and sit on its balance sheet as current assets. Companies will often sell their trade receivables to invoice discounters/factoring companies to provide balance-sheet relief. Alternatively, some companies will securitise their trade receivables by selling them to a special purpose vehicle, which buys the receivables by issuing securitised bonds to third-party investors. Interest to investors is covered by cash flows from the underlying receivables.