Receivable Put Options
You need to offer competitive credit terms to grow your business, but what if the financial condition of one or more of your customers is deteriorating? In the event of a bankruptcy or liquidation, how do you know you’ll get paid?
Purchasing an A/R put option gives you the opportunity—if a customer you’ve covered becomes insolvent—to sell your receivables from that debtor, without recourse, to an indemnifying financial institution.
Upon validation of your claim, you’ll get paid up to 100% of the value of your invoices…vs the amount, if any, you would have been able to recover on your own (without a put option) over the course of the debtor’s bankruptcy filing or liquidation process.
Receivable put options are available on a wide range of publicly-traded debtors, as well as large privately-held companies if their debt is traded in bond markets.
Receivable put options can cover debtors that are too distressed to be underwritten with credit insurance, but at a higher cost than the typical insurance policy premium.
Rates for A/R put options range from one-half percent to several percent per month on the covered exposure amount.
Accounts receivable put options are non-cancelable and can be structured with terms from as short as three months to as long as three years.
Meridian Finance Group specializes in helping companies grow their sales with credit insurance, A/R put options, and other trade finance tools.
All receivable put options arranged by Meridian are backed by top-rated global financial institutions. We offer programs from every bank and insurance company in the A/R put market, enabling us to quote the most competitive rates and terms.
We understand your business. Receivable put options have proven to be especially effective in the retail sector and Meridian has over 20 years of experience supporting suppliers who sell to major US and foreign retail chains.
By competing more effectively than other suppliers, who may be backing away from selling to a distressed debtor, you can use a receivable put option to maintain or expand your share of that key customer’s business.
Receivable put options enhance your borrowing capacity by making your A/R more attractive to banks and other lenders, even if your receivables include concentrations of risk or sales to debtors outside your bank’s comfort zone.
You’ll strengthen your balance sheet with receivable put options and keep your company’s financial position secure, despite exposure to unforeseen events, concentrations of credit risks, and changing market conditions. You may also be able to reduce your company’s bad debt reserves.
Lease put options protect equipment lessors against the rejection of a lease by a lessee that files bankruptcy.
The amount of a lease put option can adjust with the amortization of a lease’s payment stream and/or the equipment’s assessed residual value. At the lessor’s discretion, the covered percentage can be tied to total exposure or only unsecured exposure.
While an expensive addition to the internal cost of a lease contract, a lease put option can facilitate leasing equipment to a distressed publicly-traded debtor that might otherwise be imprudent or impossible to accomplish.