Most companies don’t know this, but your future sales are an asset you can finance for upfront capital. Under the Uniform Commercial Code (UCC), Article 9 (also known as UCC-9), “Accounts” is defined as:
- Present and future deposits
- From sales or future sales
- Whether earned or unearned
Examples of UCC-9 Assets
“Accounts receivable” (A/R)
What is it? Future Deposits from Earned Sales (hence, receivable). You delivered the work. Now you need paid. But “receivable” is NOT defined in UCC-9. Yet the definition of “Account” covers it: Future deposit, from an earned sale.
That pending customer payment is an asset. And assets can be financed
That’s where products like factoring and lines of credit come in. Or “Asset based financing“, as we call it.
Another example:
Future Accounts (Receipts)
What is it? Future Deposits from unearned sales, that have yet to happen. i.e. The fact that a customer MIGHT walk in the door in 1-12 months = Asset. And again – assets can be financed. That’s where products like “sales based financing” come into play.
Oddly enough there is a debate in our world about whether something is asset based or not. “Is the asset crystallized, or uncrystallized?” Receivables are crystallized. Future sales are not. But in the eyes of the law – it’s all the same.
The real difference is what level of risk the funder is willing to take.
