Preparing for Off-Balance-Sheet Financing: A practical guide for lenders, microlenders, and asset-financing companies

For many non bank lenders or alternative credit providers (i.e.  PAYGo distributors, microlenders, and asset-financing companies), growth is not limited by demand,  it’s limited by capital.

Access to affordable, long-term financing remains a bottleneck, especially for smaller or growing operators. One reason is structural: the sector relies on on-balance-sheet lending, which increases leverage faster than equity can grow, limiting how much additional debt can be raised as portfolios scale

Off-balance-sheet (OBS) financing offers a different path, but only for organisations that are operationally and digitally ready.

This guide explains what OBS financing really requires, why data and systems matter more than ever, and how distributors can prepare themselves to access institutional capital through receivables sales or blended finance structures.

Understanding Off-Balance-Sheet Financing

Off-balance-sheet financing allows a lender or distributor to transfer ownership of receivables (or financed assets) to an investor (typically via a special purpose vehicle (SPV)). In simple terms, future repayments are sold upfront, freeing cash that can be reinvested into scaling the operation.

In PAYGo and microfinance, this model is powerful because it:

• Allows capital to be recycled faster

• Reduces concentration risk on the originator’s balance sheet

• Attracts institutional investors seeking predictable cashflows

• Lowers the cost of capital, ultimately lowering end-user prices

But OBS financing is not enabled by financial engineering alone. The real gatekeeper is data integrity and operational maturity. Investors will only buy portfolios they can understand, trust, and monitor over time.

The real questions investors ask

When investors review receivable portfolios, they are not only asking “How strong are repayments?”. They are asking:

— Can we trace every receivable back to a signed contract?

— Can performance be monitored continuously?

— Is the data audit-ready, consistent, and standardised?

OBS readiness is therefore less about size,  and more about systems, governance, and data standardisation.

A practical journey to OBS readiness: Step-by-Step Guide

Step 1. Data Mapping

Start by mapping how data actually flows through your organisation — from customer onboarding to repayment collection:

• Identify all systems currently in use (CRM, ERP, mobile money, Excel, etc.).

• Map how customer, contract, asset, and payment data flow between them.

• Eliminate manual steps that introduce inconsistencies or delay.

• Ensure each customer/asset/loan has a unique, persistent identifier.

• Link field agent activity and payments to that identifier.

Step 2. Clean and structure your portfolio data

Investors expect to see complete customer records, clear contract terms, timestamped repayments, and asset identifiers,  not approximations or summaries.

➔ Must-haves include customer details, contract terms, repayment history, contract status, and asset identifiers.

➔ Nice-to-haves may include customer demographics, asset usage data, and service interactions.

Step 3. Digitise contracts and legal records

Contracts and legal documents then need to be digitised and securely stored. For true-sale structures, legal clarity is non-negotiable. If ownership and assignability cannot be proven digitally, the receivable cannot be sold.

➔ Must-haves include digital copies of signed contracts, clear ownership chains, version control, and secure access logging.

➔ Nice-to-haves include e-signatures, smart contract templates compatible with receivables transfer structures, and customer acknowledgements where required.

Step 4. Implement robust payment tracking and reconciliation

Accurate, automated payment reconciliation is essential for investor confidence, while manual reconciliation is a major risk and delays due diligence.

At a minimum, payments should be automatically linked to customer and loan IDs, reconciled daily, and flagged when exceptions occur.

Step 5. Monitor portfolio performance with clear KPIs

Off-balance-sheet financing requires ongoing transparency, not just historical reporting. Performance monitoring becomes powerful,  not only for investors, but for internal decision-making. 

At a minimum, organisations should be able to report portfolio size, outstanding balances, collection rates, and Portfolio at Risk (PAR30, PAR60, PAR90). Churn rates, contract closures, and vintage analyses help investors understand how repayment behaviour evolves over time.

More advanced reporting may include cashflow projections, regional or agent-level performance, FX exposure, and asset uptime for PAYGo energy portfolios.

Step 6. Align legal and financial frameworks for the purchase

True off-balance-sheet treatment requires alignment between operations, accounting, and legal structures.

Organisations must be able to clearly separate transferred receivables from retained ones, document accounting treatment, and provide a clean audit trail between internal records and SPV or investor reporting. Legal opinions on the enforceability of receivables transfers are often required, as well as clarity on servicing arrangements, reporting obligations, and investor rights.

At this stage, operational readiness must translate into legal and financial certainty.

Why tools and infrastructure matter

Beyond individual steps, OBS readiness depends on having the right technical, legal, financial and governance infrastructure in place. This is where digital infrastructure becomes a strategic advantage. 

OBS transactions require more than clean historical data. They require ongoing integrity, traceability, servicing capability, legal alignment, and investor-grade reporting throughout the life of a portfolio.

Operational Foundations: Standardising Operations

From an external investor perspective:

• Spreadsheet-based operations are hard to audit

• Bespoke in-house tools are difficult to assess

• Inconsistent data structures increase due diligence costs

• Limited visibility reduces confidence

By contrast, operating on standardised, well-documented platforms signals readiness. 

Digital solutions like PaygOps supports microlenders in managing contracts, assets, repayments, and portfolio performance using structured data models. They support unique identifiers, automated reconciliation, KPI tracking, and standardised reporting, in the case of PaygOps, this data can be directly connected to third parties such as Bridgin’s financing platform. This connection allows operational data to flow seamlessly into legal, financial, and investor reporting workflows.

Importantly, with the upcoming launch of PaygOps Community Edition, an open source and free solution, this infrastructure is now accessible to far more organisations.

Strong operations don’t just improve day-to-day performance. They make organisations more investable by reducing manual intervention, improving data integrity, and ensuring portfolios remain financeable over time.

Financing and Legal infrastructure: connecting operations to capital

OBS financing ultimately sits at the intersection of operations, technology, and legal structuring.

Financing and structuring platforms such as Bridgin provide the legal and financial rails required for OBS transactions, including:

• Receivables transfer workflows and ownership traceability

• Servicing and investor access controls

• Portfolio-level and contract-level investor reporting

• Alignment between operational data, SPV records, and accounting treatment

The Bridgin platform relies on clean, standardised data, which can be automatically fed from already compatible management tools, including platforms like PaygOps and other management platforms, or it could be integrated with in-house systems.

When integrated, operational platforms like PaygOps can feed data directly into financing infrastructure such as Bridgin, enabling:

→ Clear separation of transferred vs retained receivables

→ Continuous audit trails across operations, SPVs, and investor reports

→ Ongoing performance monitoring throughout the life of a transaction

→ Faster, lower-cost due diligence for repeat transactions

This connection addresses many of the later OBS readiness steps, including governance and data integrity, servicing transparency, legal and accounting alignment, and investor-ready reporting.

Without this bridge, OBS financing remains bespoke, slow, and expensive. Together, they turn operational reality into financeable portfolios ready to scale.

Closing the gap: from readiness to resilience

Before pursuing off-balance-sheet financing, organisations should be able to confidently answer “yes” to most of the following questions:

✓ Do we have complete, standardised, and verifiable portfolio data?

✓ Can every receivable be traced to a signed and digitised contract?

✓ Are payments reconciled automatically and audit-ready?

✓ Can we report portfolio performance continuously, not just at a point in time?

✓ Do we have clear legal documentation for receivable transfers and servicing?

✓ Are governance, access control, and data integrity enforced across systems?

If the answer to several of these questions is no, OBS financing is likely to remain slow, costly, or out of reach.

The outcome: more than financing

The same systems, governance, and data discipline required by investors also lead to stronger operations, better risk management, and more resilient growth. Organisations become easier to finance, easier to partner with, and easier to scale.

Off-balance-sheet financing is not the starting point. The real work happens earlier, in how portfolios are built, managed, and monitored every day.

Learn more

To explore how operational platforms can support OBS readiness, visit paygops.com.

To learn more about financing and structuring infrastructure for receivables-based financing, visit bridgin.io.