What Is a True Sale of Receivables?

The short answer

A true sale transfers receivables rather than merely pledging them as security, but the legal and accounting assessment depends on contract terms.

The decision depends on the customer's payment terms, the documents supporting the transaction and the full cost of funding. For receivables, eligibility generally starts with an actual B2B invoice for completed, accepted work or delivered goods.

A practical way to approach it

Ask counsel to review assignment, recourse, control of collections and insolvency-related provisions.

Prepare the underlying contract or purchase order, current financial records and a dated schedule of when cash is needed and when the buyer is expected to pay. Use those facts to compare a funding proposal with your other available options.

What to check before committing

The label 'sale' in marketing material does not settle the legal analysis.

Ask how fees accrue if payment or shipment is delayed, which records must be verified, and whether existing liens or contract terms limit the transaction. Get the full terms in writing rather than relying on an advertised rate.

Next step for your business

List the specific invoices or confirmed orders involved, their buyer, amount, due date and supporting evidence. Bring that packet to a funding conversation so the answer is based on your transaction rather than a generic estimate. For a tailored review, contact National Invoice Factoring at (929) 658-8087.