Invoice Financing

Invoice (Receivables) Financing

While trading on credit terms brings several benefits to businesses, it also brings the threat of late payment, and you may need to dedicate time to ensuring you get your invoices paid faster.

Whether you offer terms to customers of 14, 30 or 90 days, you will almost always need to pay suppliers to fulfil an order in advance of getting paid. This means that cash flow can be tied up for long periods, particularly for companies which invoice at month end.

Similarly, this can leave your cash flow at the mercy of your customers. If they don’t pay on time, it can be challenging to manage the cash flow implications. There are, however, a number of ways to get invoices paid faster in order to improve your cash flow with Meridian Acceptances Limited (MAL)

What it is not

It is not a loan – It is not debt; typically remains as accounts payables for the Buyer and for the Supplier it represents a true sale of their receivables

It is not factoring – 100 percent of each invoice — minus a discount, is paid to the supplier, and there is no credit recourse to the supplier once the invoice is paid

It is not just for large companies – It provides value for firms of all sizes and credit ratings, including SME suppliers across public and private sector

No change to existing process – No cost to Buyer on supplier early payment | Only costs vendor if they choose early payment

MERIDIAN could enable Buyer to free up cash by extending accounts payable.
- Improve Cash Conversion Cycle
- Reduce costs in supply chain
- Increase the weighted average payment days (WAPD); Average days to pay = the total number of days to pay divided by the number of closed invoices.
- Treasury can achieve these benefits with little or no distraction from other priorities; Procurement and AP resources typically lead the effort

Suppliers can also choose to increase cash flow by getting paid early (e.g., rather than being paid in 60-180 days, they can get paid within 10 days)

MERIDIAN purchases eligible accounts payable/receivable on a discounted basis from Buyer’s suppliers.

Suppliers’ access to cheaper funding can be translated into lower prices to Buyer

Receivables Finance Illustration.

Sample Timelines.

Using the supply chain to fund the organization, and
Using the organization to fund the supply chain.
Firms are looking to an efficient and effective supply chain to fund the growth and or liquidity health of the company/organisation.

Program Structure and Principles

The structure includes an irrevocable payment undertaking by the Buyer/Anchor Corporate to make payment at maturity date to MERIDIAN for a specific approved amount.
Buyers can partner with MERIDIAN to create a Payables Finance program, which is designed to allow Suppliers to elect to receive payment prior to or on invoice maturity date.
MERIDIAN has existing arrangement with inventors and a diverse pool of funders to provide payments to Suppliers.
Once MERIDIAN receives payment instruction for approved invoices from the Buyer, Supplier may elect to receive early payment for the approved amount.
Any early payment to the Supplier is based on Supplier’s agreement to sell receivables to the Meridian at a discounted rate,
Investors are paid the full invoice amount by MERIDIAN on behalf of the Buyer at original maturity
Participation in the program should be optional for Suppliers:
- Suppliers who participate can elect to be paid for invoice(s) prior to the maturity date at a discounted rate
- Suppliers who chose not to participate will be paid total invoice value on the maturity date by MERIDIAN

Program typically requires two legal agreements to be executed details of which are outlined below:

Buyer Agreement a.k.a. Payables Agreement/Payment Service Agreement (PSA) or Irrevocable Payment Undertaking (IPU)
Supplier Agreement, a.k.a. Receivables Purchase Agreement (RPA)
Buyer is not a party to the RPA, and the Supplier is not a party to the PSA/IPU; there are no tri-party agreements.
No economic value is transferred from MERIDIAN to the Buyer.
Buyer is responsible for clearing and confirming with their internal and external auditors about the program detail’s structure.
MERIDIAN communicates directly with Suppliers regarding on-boarding including but not limited to the execution of an RPA, discount rate for payment prior to due date and documentation required for on- boarding.
Tenor is short term, generally under one (1) year.
Commercial disputes for credit notes, offsets, warranties, etc. are managed outside of the program before the Buyer approves invoices for payment and gives instructions to MERIDIAN.