Shadow banks eye accounts receivable as lenders retreat

Providing loans against unpaid invoices is an old business that is being done in some very new ways. Facing increased capital costs, banks are retreating into a distribution and structuring role, with hedge funds and other investors taking the credit risk

A different approach: shadow banks are less affected by regulation

Hedge funds are getting into the accounts receivable game – lending to companies against their unpaid invoices – as capital-constrained banks retreat. It is the latest example of non-banks replacing banks as risk-takers but, here, it is often happening via partnership, rather than competition. Banks are continuing to arrange and structure the financing, as well as stumping up some of the funding.