In an effort to offset the financial squeeze felt by many companies, B2B spend management provider Ariba Inc. has forged a partnership with The Receivables Exchange, which bills itself as the first online auction marketplace for real-time trading of accounts receivables.

The Receivables Exchange, which launched its online auction platform just three weeks ago, caters to small and medium-sized businesses that have a large percentage of their working capital tied up in outstanding invoices and need cash to continue to grow their businesses.

The exchange works on the premise that investors will buy a manufacturer’s or supplier’s accounts receivable. For example, once a supplier sells an order of goods, it generates an invoice whose payment terms may be 60 days out, leaving that supplier to wait for two months or more for the money. The Receivables Exchange allows a supplier to immediately auction off that accounts receivable, generally to hedge fund and institutional investors.

Companies that use the Ariba Supplier Network to exchange order and payment information now have access to this add-on service. When a buyer’s ERP system generates an electronic accounts receivable statement and sends it through the network to the supplier, the supplier can now securely flow that approved receivable directly into the Receivables Exchange.

While manufacturers traditionally have had the option of “factoring” their receivables — a similar process by which the companies essentially cash in on the promise of imminent payment — the rates and risks of factoring are higher than dealing with a community of investors, officials from The Receivables Exchange told Managing Automation today.

“In this market, we are finding a lot of hedge fund investors and institutional investors that don’t have a place to put their cash right now,” said Laurie Azzano, a spokeswoman for The Receivables Exchange. “For them, this is a stable asset class.”

Under the Ariba-Exchange alliance, suppliers control the auction by specifying the minimum and maximum buyout prices and the duration of the auction. Investors can consider the creditworthiness of the supplier and its obligators when making a bid. For example, if the supplier has been in business for only two years, but its customers are Fortune 500 companies with high creditworthiness, potential investors may view the receivable as a safe investment.

To that end, many of the 160,000 suppliers in Ariba’s network are global, high-profile companies, according to the provider. In addition, the Ariba network provides payment histories between buyers and sellers to help investors determine risk profiles.

The agreement with The Receivables Exchange is part of Ariba’s effort to build out an ecosystem of partners that can help its customers financially. Ariba currently offers solutions that help buyers pay suppliers, including a buyer-funded discount manager in which the buyer uses its own cash to pay the supplier early, as well as third-party supply chain financing agreements. Both of these models, however, are focused on the buyer, not the supplier. The Receivables Exchange partnership now gives suppliers new sources of working capital.

While any supplier can join The Receivables Exchange for a one-time registration fee of $500, early subscribers within Ariba’s network will have that fee waived. Ariba may charge its own setup fee at some point, the company said, but it will be less than what the exchange charges.