Forward Flow Receivables Purchase Agreement

A forward flow receivables purchase agreement (FFRPA) is a type of financing arrangement in which a company agrees to sell its future accounts receivable to a third-party investor. This type of agreement provides the company with immediate cash flow, as they receive payment for their outstanding invoices upfront, rather than waiting for customers to pay on their own.

The FFRPA is a popular financing option in the healthcare industry, where medical providers often have a large volume of outstanding accounts receivable. These providers can sell their future receivables to investors, enabling them to generate cash flow to cover operational expenses or invest in growth opportunities.

The structure of an FFRPA is relatively simple. The company sells its accounts receivable to the investor for a predetermined price, typically a discount to the face value of the receivables. The investor then assumes the risk of collecting payment from the customers, and once the receivables are collected, the investor receives the full face value of the receivables.

One of the key benefits of an FFRPA is the predictability it provides for both parties. The company knows in advance how much cash they will receive for their receivables, providing them with a reliable source of financing. Meanwhile, the investor knows exactly what receivables they will receive, enabling them to accurately assess the risk and potential return on their investment.

In addition, FFRPAs are typically non-recourse, meaning that the investor assumes all the risk of collecting payment from customers. This provides a greater level of security for the company, as they are not liable if the investor is unable to collect on the receivables.

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