Definition
Money owed to a business by customers for goods or services delivered on credit.
Why it matters
Receivables appear as a current asset on the balance sheet and are the collateral behind AR financing and factoring.
Where it shows up in a deal
Your receivables reach a funder as an aging report, not as a single balance-sheet number. During diligence an underwriter reconciles that aging to your general ledger and recent bank deposits, then sorts the ledger customer by customer into what it can approve, cap or exclude. The approved slice is what the facility is actually sized against.
What it affects
- Only the approved, undisputed slice of the ledger generates cash, so total AR overstates what you can draw.
- The age profile drives pricing as much as the dollar total does.
- Receivables owed by consumers, affiliates or unverifiable buyers are excluded outright.
- AR already pledged to another lender cannot be financed until that lien is released or subordinated.
A worked example
A ledger shows $850,000 of AR. Of that, $90,000 is over 90 days, $60,000 is owed by a buyer the funder declined, and $40,000 is construction retainage. Eligible receivables are $850,000 - $190,000 = $660,000, so an 85% advance produces $561,000 of availability, not the $722,500 the gross balance suggests.
The common mistake
Related terms
- Aging ReportA report that groups unpaid invoices by how long they've been outstanding.
- Eligible ReceivablesInvoices that meet a funder's criteria for advancing.
- Days Sales OutstandingThe average number of days it takes to collect payment after a sale.
- Working CapitalCurrent assets minus current liabilities — the cash available to run daily operations.
Questions about how accounts receivable affects your facility?
Call (929) 658-8087 or request a written quote — no obligation, no credit impact.
