A colleague recently introduced me to an interesting project, the Receivables Exchange, a new on-line marketplace for trading accounts receivable. The exchange allows businesses to sell their accounts receivable to outside investors and to receive working capital in the interim. This service could be a potential lifeline to many smaller firms who need working capital, yet cannot wait for customer payments that may take as long as 60-90 days or even longer. In the past few months, I’ve talked with dozens of small business owners who have contracts and accounts receivable in hand, yet are unable to access working capital from local banks. Efforts like the Receivables Exchange are one potential new capital source for firms facing a pressing cash crunch.
It appears that the current downturn may be stimulating some new ideas and innovations in the world of small business finance. In addition to new on-line marketplaces like the Receivables Exchange and Prosper.com, larger firms are also looking into the possibilities of offering finance to small business partners and suppliers. A recent Morgan Stanley report examines some of these trends. In all cases, small business owners should look before they leap. But, the good news is that some new and potentially promising financing options do appear to be emerging in the marketplace.