As quarter-end approaches, many companies look for ways to present a more liquid balance sheet for their financial statement. That is why they turn to CIT. Other companies need to liquefy their accounts receivable to meet short-term obligations. They, too, turn to CIT.

Companies of all sizes use CIT's bulk sale of accounts receivable program to turn their accounts receivable into cash. Below are some of the most frequently asked questions about this service. If you have additional questions or if you would like to discuss this service in greater detail, e-mail us or call us at (800) 248-3240. We look forward to working with you.

Frequently Asked Questions

What is a bulk sale of accounts receivable?
When can companies take advantage of a bulk sale of accounts receivable?
Is a bulk sale of accounts receivable right for your company?
Want to learn more?
Want a free price quote?

What is a bulk sale of accounts receivable?

A bulk sale of accounts receivable is a method of off-balance sheet financing used by companies to turn accounts receivable into cash. It is a one-time or periodic outright sale of all or a portion of your company's accounts receivable to CIT Commercial Services.

When can companies take advantage of a bulk sale of accounts receivable?

Companies of all sizes use this innovative financing technique. Each bulk sale arrangement is customized to the company's specific needs. Transactions can be structured and documented quickly.

Below are a few examples:

Accelerating payment
Companies sell their accounts receivable for cash when they need to meet short-term obligations like year-end employee bonuses.

Satisfying bank requirements
An unsecured borrower could sell a portion of its accounts receivable to meet the clean-up or clean-down requirements specified in its bank loan agreement.

U.S. financing for international companies
U.S. subsidiaries of international companies face certain tax issues when borrowing from a U.S. lender based on a parent-company guarantee or comfort letter. Since the tax law change in 1995, the interest expense on such a loan may no longer be tax deductible. A bulk sale of account receivable is a way to finance working capital requirements while maintaining the deductibility of interest expense.

Impact abroad via off-balance sheet financing
The U.S. subsidiary of an international public company can use this service to secure off-balance sheet financing and direct the funds to the parent to reduce its borrowings. This would show a more liquid financial position on the parent company's public financial statements. The result is less leverage -- which often translates into a higher stock valuation.

Clean acquisition
A bulk sale could serve the interest of either the buyer or the seller in an acquisition. Prior to (or in conjunction with) an acquisition, the outstanding accounts receivable may be sold to CIT. The bulk sale can help reduce the borrowing needs of the buyer at closing. Funds advanced on a bulk sale would be remitted as required by the buy/sell agreement and CIT will provide full accounting to the buyer and seller for post closing adjustments.

Bridge financing
This financial tool can be used as a bridge to fund cash shortfalls that may occur during a financial restructuring or during the due diligence phase of a company's conversion from an unsecured to a secured lending facility.

Is a bulk sale of accounts receivable right for your company? Take this test!