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How can you Hedge your Receivables to protect the overall financial health of your Company?

Receivables financing, also known as invoice financing or accounts receivable financing, is a type of financing where a business sells its outstanding invoices or receivables to a financial institution or third-party company at a discount. This allows the business to receive immediate payment for the outstanding invoices or receivables, which can help to improve its cash flow and provide access to working capital.

Hedging your receivables is an important strategy to protect the overall financial health of your company. Here are some ways to hedge your receivables:

Use credit insurance

Credit insurance can protect your receivables from non-payment due to customer bankruptcy, insolvency, or default. It can cover a percentage of the outstanding balance or the total amount, depending on the policy.

Factoring or discounting

Factoring or discounting allows you to sell your receivables to a third party at a discount, providing immediate cash flow and reducing your exposure to credit risks. This can be particularly useful if you have customers with extended payment terms or a high risk of default.

Forward contracts

A forward contract is an agreement to exchange currency at a predetermined rate on a future date. This can be useful if you have receivables in a foreign currency and want to protect against currency fluctuations.

Options contracts

Options contracts give you the right, but not the obligation, to buy or sell an asset at a predetermined price on a future date. This can be useful if you want to protect against currency or interest rate fluctuations.

Letters of credit

A letter of credit is a guarantee from a bank that it will pay your company in the event that your customer fails to pay. This can provide added security and reduce your exposure to credit risks.

By hedging your receivables, you can protect your company from credit risks and ensure that you have a stable cash flow. It is important to carefully evaluate your options and choose the best strategy for your needs and goals. Consulting with a financial advisor or professional can help you make informed decisions and minimize financial risks.



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Empowering Business Growth

Access to working capital in an affordable and efficient manner is essential for business.

We recognize the need for customized solutions as each business has differing requirements.

SupplySci provides accounts payable and accounts receivable funding programs to meet your evolving liquidity requirements combined with our product procurement program.

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