Another valuable business asset can be its accounts receivable. This is
true for physicians and other professionals and service providers who
may have few tangible assets but considerable receivables. Of course,
you can encumber accounts receivable with liens in the same way you can
encumber any other asset. For lawsuit protection you can also factor or
sell the receivables to a factoring company for fast cash, which is always
more easily protected. Factoring companies buy receivables owed by business
customers with acceptable credit for a modest discount. Factoring companies
specialize. Some buy receivables due to physicians and other professionals,
but there are factors for every type business. Your objective is to find
your best deal when you want fast cash and less exposed receivables. It’s
also possible to use receivables to secure insurance premium financing.
Essentially, you encumber the receivables and use the premiums to buy
life insurance, which is ordinarily creditor exempt. This, however, should
be reviewed with your professional financial advisor to determine that
it makes economic sense.
You can also establish your own accounts receivable billing and collection
firm where only the net proceeds after all billing and collection costs
would be remitted to the debtor company. The larger share may remain with
the billing and collection company as earned fees. You can see that we
have many legitimate ways to encumber any size or type business.