Last year Edge Trucking, a Bayshore, N.Y., distribution and warehousing business, had more than $150,000 in accounts receivable but no cash to repair its truck fleet or to pay other pressing bills. Banks wouldn't offer credit to the $2-million service business, notes vice-president Jeff Chapov. "When things got really bad, we had to look for customers who could pay us fast."

Today, though, thanks to something called a trade-acceptance draft (TAD), Edge's cash troubles seem to be history. The company no longer has to sit around waiting for customers to pay invoices. Indeed, Chapov says, "We get most of our money in 48 hours."

A TAD has some elements of a letter of credit in that, once completed, it becomes easily negotiable with other parties, such as banks. For Edge, it works like this: When an Edge truck driver makes a delivery, the customer that receives it is asked to sign a document accepting the merchandise and agreeing to make payment on a specific date (in this case, the 15th of the month). Edge then endorses the signed paper over to a financial company in New York City, Actrade International (212-563-1036), which advances 75% of the face value within two business days. The remainder, less service fees and interest, is paid after the funds are drawn on the customer's bank account (on the date specified).

TADs aren't well known in the United States, but they're widely used overseas as a way to minimize financial disputes, notes Actrade founder Amos Aharoni. TADs cost more than bank money does (assuming it's available), but they're typically a bit cheaper than using a factor. Actrade charges processing fees of 1½% to 4% (depending on such things as the creditworthiness of the client's customers and the overall volume of business), plus interest based on the client's credit and how long it takes customers to pay.

A big difference: companies don't need to pledge their assets as collateral. "A TAD is a piece of paper that can stand all by itself," Aharoni says.