Financing Patterns For Accounts Receivable Management Of GX Corporation

GX LCD panel manufacturing corporation,an small and medium corporation,boasts animportant stance in home market, big quota of whose finished LCD panel parts are mainlysupplied to several machine manufacturers in china, besides a small portion of which areexported abroad. Being set in a opportunity for development, GX LCD panel corporation hasto accept the credit transactions proposed by buyers, namely the machine manufacturingtycoons, for the sake of the maintenance of buying and selling. In the past few years, GXcorporation has been feeling an unbearable pressure for the receivables themselves and thecosts caused by management of receivables.The “trade finance”mainly includes financial service based on the inventory, based onthe deposit prepaid, based on the accounts receivable. Furthermore, the financial service basedon receivables can be also subdivided to three sub-modes: namely pledged loan, factoring,and backed securitization.According to the company’s own development situation, the internal financialdepartments come to the conclusion that they should choose the factoring financing business.Then they formulated the suitable price model of the calculation of factoring financing, andmake it clear how to calculate the probability of the default of the debtor (the buyer).GX’s managers decided to set alternative patterns embracing pledged loan and factoringbased on receivables. As a matter of fact, the pledged loan and factoring based on receivablesare approximate. However, the pledged mode can not polish the financing statement, whilethe factoring mode is qualified to polishing the financial statement by turning “accountsreceivable” into “real revenue” after transferring the accounts receivable from GX corporationto the factors.After comparing the two sorts of supervision item from china construction bank andbank B, especially the threshold of rating sequence of the suppliers along with accountsreceivable age, and comparing the quoted prices of two banks, GX corporation decided tochoose china construction bank as a factor, and have been achieved significant financialresults.