Full formBanking & Finance
LARstands forLoan Against Receivables
Full Form of LAR
What is LAR?
Loan Against Receivables (LAR) is a short-term financing facility where a business borrows funds using its accounts receivable as collateral. The lender advances a percentage of the invoice value—typically 70–90%—and the borrower repays the loan once the customers settle their dues. In India, LAR is widely used by micro, small, and medium enterprises (MSMEs) to manage working capital gaps caused by delayed payments. Banks and non-banking financial companies (NBFCs) offer LAR under various names, including receivables discounting and invoice factoring. This facility is especially popular in sectors like manufacturing, textiles, pharmaceuticals, and logistics, where payment cycles are stretched. LAR helps businesses maintain liquidity without taking on long-term debt. It is also integrated with digital platforms such as TReDS (Trade Receivables Discounting System) to streamline financing for MSMEs. For students preparing for banking exams like JAIIB, CAIIB, and RBI Grade B, understanding LAR is essential as it appears under the working capital management module. The facility is governed by RBI guidelines and often requires the borrower to submit invoices, purchase orders, and proof of delivery. LAR is a cost-effective alternative to cash credit if the business has a strong receivable book.
LAR का फुल फॉर्म
प्राप्तियों के विरुद्ध ऋण
Example
The textile mill availed an LAR of ₹50 lakh against its pending invoices from retail buyers to meet its payroll obligations.
LAR — frequently asked questions
What is the full form of LAR?
LAR stands for Loan Against Receivables. It is a short-term borrowing facility where a business uses its unpaid invoices as collateral to get funds from a bank or NBFC.
How does LAR differ from a bank overdraft?
LAR is specifically secured against accounts receivable, whereas an overdraft is a revolving credit facility linked to a current account and can be secured by various assets or unsecured. LAR is typically used for invoice-based financing, while overdraft offers more flexibility for day-to-day expenses.
Is LAR available to all businesses in India?
Yes, LAR is available to businesses that have a steady stream of credit sales and maintain proper invoicing records. MSMEs, corporates, and exporters commonly use it. Lenders assess the creditworthiness of the borrowing company and the quality of its receivables.