Matt Levine’s Money Stuff: First Brands Did Some Round Trips

First Brands

Modern trade finance comes in two basic flavors, accounts receivable financing and accounts payable financing. Accounts receivable financing — “factoring” — is the traditional form:

1. Company sells product to customers.
2. Customers buy on credit; they get the products, the company sends them invoices, and they have, say, 60 days to pay.
3. The company would like the money sooner.
4. A lender lends the company, say, 98% of the money, collateralized by the invoices.
5. When the customers pay the invoices, the money goes to the lender.

That is, the company is borrowing money against its accounts receivable, and paying it back within 60 ...