Efficient liquidity may be one of the hardest practices for a business to achieve during this economic crisis. Since there's no guarantee when this financial mess will end, many companies are looking for ways to minimize their dependence on bank loans and sell off their accounts receivable, Treasury & Risk reports.
Certain companies decide to auction off their accounts receivable through internet auctions. In essence, they are selling a product with a monumental return on investment rate if the winning bidder attains a majority of the debts. According Nic Perkin, president and co-founder of Receivables Exchange, a bidder can often acquire such accounts receivable for one-hundredth of its overall value. Therefore, an account which is indebted $1,000,000 could be bought for $10,000 - if the bidder is lucky enough. Other accounts may sell for the entire value of debts, so the profit gained from such an account would have to come from interest compounded in the future. These types of accounts are valued higher because the debtors are more apt to pay, more than likely as a result of good credit history.