What Are Working Capital Notes™?

Working Capital Notes™ are ETR Digital's digital negotiable instruments designed to unlock liquidity by converting approved payables or receivables into a transferable, legally enforceable payment obligation. Put simply, they modernise familiar instruments such as promissory notes and bills of exchange into a secure, digital format that can be issued, accepted, transferred, and funded with far less friction than paper-based trade processes. For treasury teams, Working Capital Notes™ are not “another finance product”; they’re a practical way to improve working capital outcomes by making payment commitments clearer, more portable, and easier to finance. 

This article explains how Working Capital Notes™ work in real workflows, whether they align with MLETR principles, how they compare to invoice finance, who they’re for, why treasury uses them, why adoption is accelerating now, and what “legally enforceable” means in practice. 

How Do Working Capital Notes™ Work in Practice? 

A Working Capital Notes™ is used to formalise a payment obligation in a transferable way, meaning it can be passed (endorsed/assigned, depending on the instrument structure and jurisdiction) to a bank or liquidity provider who funds against it. 

The basic lifecycle (end-to-end) 

1. Create the Working Capital Notes™ (often linked to invoice or trade data) 
2. Accept or acknowledge (where applicable) by the payer 
3. Hold or transfer the Working Capital Notes™ to a funder/investor (to raise cash early) 
4. Fund the holder (supplier/exporter) early, typically at a discount 
5. Settle at maturity (payer pays the Working Capital Notes™ holder) 
6. Retire the Working Capital Notes^TM with a complete record of actions and ownership 

The “digital” advantage is that each of these steps can be executed quickly, with clear evidence of who did what, when, and who currently controls the instrument. 

Scenario A: Buyer-led payables financing (supplier gets paid early) 

This is the classic treasury-led working capital play. 

• A buyer approves supplier invoices (or agreed trade amounts). 
• The buyer issues a Working Capital Notes™ payable at a future date (maturity). 
• The supplier can hold the Working Capital Notes™ to maturity or transfer them to a funder for early cash. 
• The funder pays the supplier early (less a financing cost). 
• At maturity, the buyer pays the current Notes holder. 

Why treasury likes this: 

• Suppliers can get early payment without the buyer changing commercial terms. 
• Treasury can better manage cash outflow timing and improve working capital performance. 

Scenario B: Supplier-led receivables financing (supplier accelerates cash-in) 

This is a receivables acceleration route where the supplier uses a Note to make a receivable more fundable. 

• The supplier creates a Working Capital Notes™ tied to the receivable/trade claim. 
• The buyer accepts the obligation. 
• The supplier transfers the Working Capital Notes™ to a funder to receive cash early. 
• The buyer pays the Working Capital Notes holder at maturity. 

Why suppliers like this: 

• Faster access to cash than waiting for the invoice due date. 
• Potentially stronger funding terms if the instrument is viewed as more enforceable/transferable than an invoice claim alone. 

What changes when the Working Capital Notes™ is digital 

Digital Working Capital Notes™ reduce the operational friction that historically made negotiable instruments slow and paper-heavy: 

• Speed: issuance, acceptance, and transfer can happen in days (or less), not weeks. 
• Control: systems can demonstrate who controls the “original” electronic record. 
• Traceability: every indorsement/transfer and lifecycle action can be recorded and is auditable. 

Are Working Capital Notes™ MLETR Compliant? 

Many discussions of digital negotiable instruments refer to the UNCITRAL Model Law on Electronic Transferable Records (MLETR).  

MLETR is a model legal framework designed to help electronic records function like paper “originals” for documents that need: 

• a concept of possession/control 
• transferability (someone else can become the holder) 
• integrity (the record hasn’t been altered improperly) 

MLETR-style requirements (the checklist treasurers care about) 

A digital Working Capital Note is more likely to be regarded as MLETR-aligned if it can show: 

• Singularity: there is only one “authoritative” electronic record (one original) 
• Control/possession: only one party can control it at a time 
• Integrity: tamper-evidence and verifiable history protect authenticity 
• Transferability: transfers preserve the chain of title/ownership 

The practical nuance 

Even if a solution is designed around MLETR principles, enforceability depends on jurisdiction (and how local law recognises electronic transferable records or equivalent constructs). The right way to communicate this in a treasury context is: 

• “Designed to align with MLETR principles,” and 
• “Deployed with legal structure appropriate to the relevant jurisdictions.” 

Working Capital Notes™ vs Invoice Finance 

Invoice finance is widely used, but invoices alone are not always the strongest funding asset, especially across borders or when funders want a clearer payment obligation and transferability. 

Who Are Working Capital Notes™ For? 

Working Capital Notes™ are typically most valuable where there is enough volume and operational maturity to benefit from standardisation. 

Corporate profiles that benefit 

• Large buyers with significant AP spend and supplier ecosystems 
• Exporters/importers dealing with cross-border trade and documentary friction 
• Businesses with long payment terms and a strong need to stabilise supplier liquidity 
• Groups with seasonal working capital strain (high inventory cycles, peak sales periods) 

Internal stakeholders 

• Treasury: working capital KPIs, liquidity planning, funding strategy 
• AP / Procurement: supplier outcomes, payment governance, dispute reduction 
• AR: cash acceleration, receivables predictability 
• Legal / Compliance: enforceability, governing law, cross-border considerations 
• IT / Operations: integration, identity/signature workflows, audit requirements 

External stakeholders 

• Banks providing payables/receivables funding 
• Alternative funders/investors seeking traceable, standardised trade-related assets 

Key Benefits of Working Capital Notes™

Treasury adoption tends to happen when benefits are both measurable and repeatable. 

Working capital outcomes

• Better cash timing control: move cash earlier/later without rewriting core trade terms 
• CCC improvement: improve the cash conversion cycle by accelerating inflows or managing outflow timing 
• Greater predictability: clearer commitment to pay can reduce uncertainty for suppliers and funders 

Operational efficiency 

• Less admin: fewer paper steps, less manual chasing, clearer evidence 
• Faster funding readiness: improved turnaround from approval to fundability 
• Structured lifecycle actions: issuance, acceptance, transfer, and settlement are trackable 

Risk and control 

• Audit-ready: clearer evidence of approvals, changes, and ownership 
• Governance: clearer controls around who can issue/approve/transfer 
• Dispute resilience: a properly structured instrument can reduce ambiguity about the obligation 

Why Are Working Capital Notes™ Used in Treasury? 

Treasury uses Working Capital Notes™ when the goal is not merely “more financing,” but better control of liquidity and working capital performance. 

Treasury motivations 

• Liquidity certainty: a formalised obligation can improve confidence for funding and planning 
• Funding diversification: access to different liquidity sources depending on structure and holders 
• KPI management: support DPO/DSO strategies and CCC improvement 
• Supplier stability: suppliers can be paid earlier, while the buyer retains cash timing flexibility 
• Governance and visibility: better oversight of instruments versus fragmented invoice-level funding 

Where it fits in the operating model 

• AP workflows: from approval → instrument issuance → settlement 
• Treasury workflows: programme limits, counterparty exposure, liquidity planning 
• Reporting: consistent treatment, audit trail, and oversight across jurisdictions 

Why Are Digital Working Capital Notes™ Gaining Momentum Now? 

Digital adoption has accelerated because the blockers that historically made paper negotiable instruments “too hard” are being removed by recognising digital equivalents in law. 

1. Legal modernisation 

More jurisdictions are recognising electronic trade documents and transferable records frameworks. Even where MLETR isn’t adopted verbatim, the direction of travel supports digitisation of trade instruments. 

2. Technology maturity 

Digital signatures, identity management, encryption, and tamper-evident record systems make it much easier to demonstrate: 

• integrity of the “original” record 
• control/possession by a single holder 
• valid transfer history 

3. Treasury pressure 

Treasury teams are under constant pressure to: 

• free up trapped cash 
• reduce funding costs 
• improve CCC and liquidity resilience 
  Digital negotiable instruments provide a route to do this without rebuilding the entire commercial relationship architecture. 

4. Market appetite and ecosystem growth 

Banks, funds, and corporates increasingly want standardised, traceable, digitised trade assets. As more participants become comfortable with the operational model, momentum builds. 

Are Working Capital Notes™ Legally Enforceable? 

The correct answer is, yes. When structured correctly and supported by the relevant legal framework and jurisdiction. 

What “legally enforceable” means 

A holder should be able to rely on the instrument as evidence of a payment obligation, and demonstrate: 

• Who issued it 
• who accepted/acknowledged it (if required) 
• who has held it over time (chain of title/ownership) 
• whether it has been amended, transferred, settled upon maturity or paid early 

A practical enforceability checklist 

Before rollout, teams should validate: 

• Governing law: which law applies to the instrument 
• Jurisdictional recognition: where counterparties are located and what’s recognised 
• System controls: does the digital process demonstrate singularity, control, integrity and transferability 
• Operational evidence: does the audit trail show clear intent, signatures/authorisations and a reliable lifecycle record 
• Dispute handling: how exceptions, reversals or disputes are managed without compromising integrity 

What funders care about most 

• clarity of the obligation 
• integrity of the “original” electronic record 
• clean transfer history 
• strong operational controls and evidence 

Frequently Asked Question: Working Capital Notes™ 

1. What are Working Capital Notes™ in simple terms? 

They’re digital versions of negotiable instruments that create a transferable, enforceable promise to pay, making it easier to fund approved trade obligations and improve working capital performance. 

2. Are Working Capital Notes™ the same as supply chain finance? 

Not exactly. They can enable supply chain finance outcomes (such as early supplier payment), but they are best understood as the instrument that can make funding more scalable and portable. 

3. Do Working Capital Notes™ replace invoices? 

Usually, no. Invoices and trade data still matter. The Working Capital Note provides a stronger, transferable payment obligation that can sit alongside the invoice dataset. 

4. Are Working Capital Notes™ MLETR compliant everywhere? 

Working Capital Notes are usually subject to English law and the exclusive jurisdiction of the English courts. They are therefore enforceable wherever English court judgements can be enforced, which is generally possible in most countries. 

5. How do Working Capital Notes™ compare to invoice finance? 

Invoice finance funds a receivable claim using invoices as a collateral; Working Capital Notes™ typically fund a transferable instrument representing an independent payment obligation. That difference can affect portability, funding terms and operational model. Lenders in invoice financing frequently advance only up to 70% of the underlying invoice value, whilst the funders of digital negotiable instruments such as Working Capital Notes often fund a higher percentage since the financing decision is based on credit rating and not invoice value alone. The Working Capital Note once transferred can be regarded as an independent asset. 

6. Are Working Capital Notes™ legally enforceable in my country? 

ETR Digital’s Working Capital Notes™ are usually subect to English law and the exclusive jurisdiction of the English courts – as such, they will be enforced by English courts that have over a hundred years experience in enforcing digital negotiable instruments. English court judgements can then usually be enforced in whichever country the assets of the debtor are located. 

7. What’s the difference between a digital promissory note and a digital bill of exchange? 

A promissory note is a promise by one party to pay; a bill of exchange typically involves an order to pay that’s accepted by the payer. Both can be used depending on whether the structure is buyer-led, supplier-led, and what is customary/legal in the relevant context. 

8. What does treasury need internally to launch Working Capital Notes™? 

Clear approval governance, defined programme limits, operational readiness in AP/AR. ETR Digital makes the use of Working Capital Notes™ straight-forward either through API/iFrames integration or by simply logging into the Flownote™ platform.