For a BUSINESS AS a Seller
It provides the Seller faster access to cash locked up in outstanding customer invoices and accounts receivable balances. This working capital can improve cash flow.
It helps bridge the gap between providing goods/services and getting paid by customers, which may take 180+ days. The Seller gets funded right away instead of waiting.
It is an alternative financing option beyond traditional bank loans or lines of credit and does not add debt to the Seller's balance sheet.
It transfers the work and risk associated with collecting customer accounts receivable to the Buyer.
For an INVESTOR AS a Buyer
Allows Buyers to diversify their investment portfolio by acquiring different types of receivables.
Offers an opportunity for profitable returns through the collection of future payments from receivables.
May reduce overall risk by spreading investments across a variety of receivables rather than concentrating on a single asset.
Provides a consistent stream of cash flow from the collection of purchased receivables.