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Lowe’s Credit Put Option- AR Put- Receivables Put – Bankruptcy Protection

Lowe’s Credit Put Option- AR Put- Receivables Put – Bankruptcy Protection

Lowe’s Credit Put Option- AR Put- Receivables Put – Bankruptcy Protection | Trade Risk Strategies

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Trade Risk Strategies assists companies all over the globe protect their accounts receivable from unexpected customer bankruptcy. We are experts with the issuance of bank issued and private hedge fund credit put options (also known as AR puts). We have structured many put options on popular names including Lowe’s and other names in the retail hardware space. We provide consultations to our clients interested in Lowe’s put options and assist our clients with negotiating the most up to date rates. We originate and set up AR put contracts with our financial partners on behalf of our clients.  We can have contracts executed the same day if necessary, or we can execute them for a future date provided fees are paid at the starting date.

What is a Lowe’s Credit Put Option?

When a supplier receives a purchase order from Lowe’s, or any retailer, credit lines and payment terms are established. The supplier invests money to manufacture or acquire the goods and absorbs the cost of salaries, overhead, and pays for shipping to deliver the goods to the client. This is done well in advance of any payment made by the retailer. Often times suppliers will “self insure” the goods, meaning, they will ship the goods without any payment protection and take a loss should there be a default by the retailer. Sometimes suppliers don’t realize that a credit put option, or AR Put, can be purchased to hedge their risk, and other times suppliers make the decision to absorb the risk themselves. Suppliers who self insure take on the risk themselves likely because the retailer represents a small portion of the supplier’s overall business. For other suppliers whose relationship with a given retailer represents a large portion of their business, without a credit put option in place, a bankruptcy filed by the retailer could be devastating if the outstanding invoice(s) remain unpaid.

A Lowe’s credit put option is a contract between the supplier and a third party financial firm who will buy the claim from the supplier if Lowe’s were to file bankruptcy. A contract is established at the prevailing rate depending on risk and market volatility. Fees are paid based on the rate and length of the term. If a bankruptcy event were to occur during the term of the contract period, the supplier would be paid 100% of the contract value (exposed open receivables) at a predetermined time after the bankruptcy court has confirmed the supplier is a named creditor on the bankruptcy petition.

A Lowe’s credit put option can be an effective way for a company to leverage the financial capacity of a third party while protecting the safety of their bottom line. In the absence of credit insurance – which is typically not available to cover retailers considered high risk – AR puts can mean the difference between a supplier taking an irreversible hit to their cash flow if a bankruptcy event took place or remaining solvent .

What types of firms offer Lowe’s AR Puts?

AR puts are offered by only a few financial firms specializing in this niche. The market is limited for this type of contract since it is considered highly specialized and speculative. Trade Risk Strategies has originated many Lowe’s credit put options and is well known in the industry and respected by our financial partners. We know the market very well and can place a Lowe’s AR put option with the most appropriate firm.

Benefits to Receivables Put Options

  • It is not necessary to cover entire accounts receivable turnover. Receivable put options ware designed for single named coverage.
  • With most put options there is no deductible or coinsurance required. (with few exceptions)
  • Straightforward put option contract between two parties.
  • Claims paid quickly once supplier is confirmed as listed as a creditor on bankruptcy petition.

Credit Put Option Considerations

  • Rates that are not locked in are subject to change based on financial news and market availability.
  • Credit put options are available to cover a limited number of publicly traded entities.
  • With few exceptions, most put option fees are due upfront at contract execution.

What is the cost of an AR Put?

Rates are based on coverage amount multiplied by monthly rate multiplied by the number of months needed

How long does it take for credit put option to be executed?

  • Depending on the financial entity offering the AR put, credit put options can be secured the same day or can take as long as 30 days depending on onboarding requirements.
  • Coverage is bound once the put option contract is executed and fees paid so timeline also depends on the expedited requirements of the client.

* Note: This is information is not an indication of Lowe’s financial strength or lack thereof. The decision to secure a credit put option on Lowe’s or any risk is solely up to the client.

Let Trade Risk Strategies help you protect your business. Fill out the form to the right or call us at 1-844-315-4985 for a custom, one-on-one consultation.

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