Why wait to be paid?

The Seller shipped the goods and is waiting, say, 30 days to be paid.  Why wait 30 days?  The receivable created on the Seller's balance sheet for 30 days costs money.  The solution is to monetize this receivable for a small fee by assigning the receivable to Hommocks and receiving payment on day 1 of shipment.  The Buyer is unaware of this financing.  If the Buyer goes bankrupt during this 30 day period, it's Hommock's problem, not the Seller's problem.  It's as if the Seller delivered the goods, made the sale and received cash on the same date, not wait 30 days.  

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Steps:

1. The Seller (ie Hommocks' client), contracts with the Buyer and ships product on, say, 30 day term.

2. The Seller receives payment from Hommocks on day 1 of shipment instead of waiting for payment for 30 days from the Buyer.  Under most receivable financings, the buyer is unaware of the discounting deal.

3. The Seller receives payment on the day 30 from the Buyer (or can be direct payment from Buyer to Hommocks).

4. The Seller pays Hommocks on day 30.

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Features:

• The Seller raises working capital and mitigates counterparty risk.

• The Facility is uncommitted.

• The maximum tenor is 120 days.

• The maximum deal amount is $50 million.

• Under non-recourse structure, the receivable is sold, assigned and transferred by Seller to Hommocks on true sale basis.  Once sold, the receivable becomes off-balance sheet.

• Under full-recourse structure, the Seller is still liable to 'repurchase' the receivable from Hommocks upon Buyer non-payment.  

• The fee is the discount margin (ie determined by Buyer's credit strength) plus the cost of funds. 

• The fee is payable by the Seller to Hommocks on the deal start date deducted from the advanced proceeds.

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Presentation Slides (10 pages):