The BSP Circular on Sales Contract Receivable: What You Need to Know

The Bangko Sentral ng Pilipinas (BSP) recently issued a circular on the use of sales contract receivable (SCR) as collateral for loans and other credit transactions. BSP Circular No. 1070 provides guidelines on the acceptance of SCR as security for credit facilities extended by banks and non-bank financial institutions.

So, what exactly is SCR and why is it important for businesses and lenders?

SCR is a financial instrument that represents the right to receive payment from a buyer for goods or services sold under a sales contract. This means that if a seller enters into a sales contract with a buyer, the seller can sell the right to receive payment from the buyer to a lender or bank. The lender then provides a loan to the seller based on the value of the SCR.

This is important for businesses as it provides them with a new financing option. Rather than relying solely on traditional collateral like real estate or inventory, SCR allows businesses to leverage their existing sales contracts to access financing. This is particularly beneficial for small and medium-sized enterprises (SMEs), who may not have sufficient collateral to secure a loan.

For lenders, SCR provides an opportunity to diversify their loan portfolio and reach new markets. SCR can be a lower-risk investment compared to other types of unsecured loans as it is backed by a valid sales contract.

However, BSP Circular No. 1070 also sets out guidelines and requirements that must be followed by both businesses and lenders. These include the need for a valid sales contract, the use of secure electronic platforms for the creation and transfer of SCR, and the requirement for businesses to disclose any existing encumbrances or claims on the SCR.

If you are a business looking to use SCR as collateral or a lender considering accepting SCR as security for a loan, it is important to familiarize yourself with the guidelines set out in the BSP circular. It is also recommended that you seek the advice of legal and financial experts to ensure that you are complying with all necessary regulations and safeguards.

Overall, the BSP Circular on Sales Contract Receivable provides a new financing option for businesses and a new investment opportunity for lenders. However, it is important that all parties involved adhere to the guidelines set out by the BSP to ensure the integrity and security of SCR transactions.