Reverse-factoring is a financing option where a 3rd party financial provider finances the supplier on behalf of the buyer. The process involves the supplier, the buyer and the finance provider .The supplier sells the buyer’s unpaid invoice to the finance provider and receives the cash quickly, the buyer also gets longer to pay for its goods.
Reverse-factoring is initially set up by the buyer who ensures the supplier is on board. The buyer receives the order from the supplier and approves the invoice. The supplier then sells the unpaid invoice to the financial provider at a discounted rate.
The financial provider will then advance up to 100% of the value of the invoice to the supplier immediately. The buyer, who has negotiated terms with the finance provider to increase the time it gets to fulfil the invoice, then pays the financial provider the value of the invoice plus interest on its maturity.
The cost of reverse factor funding is low as its rates are based on the credit rating of the buyer not the supplier. Everyone in the supply chain benefits with the reduction of problems associated with cash flow due to late payments.
Buyers that offer reverse-factoring to suppliers may be able to negotiate better terms and the buyer can benefit from cheaper longer payment terms, improving their working capital. The buyer can therefore take advantage of discounts for cash whilst still having time to pay its invoices.
Reverse-factoring is an off balance sheet finance option so it improves the balance sheet for both suppliers and buyers enabling access to future finance at better rates, where suppliers get access to cash faster and cheaper thereby improving their cash flow and working capital.
For the supplier knowing when they will be paid improves their ability to plan for the future.
The experience of both buyer and supplier is smoother and relations improved as the finance provider deals with payments.
Reverse factoring involves a finance provider paying up to 100% of a outstanding invoice to the supplier of the goods or services that have been delivered to a buyer. The buyer pays back the finance provider on maturity of the invoice plus interest.
It is the buyer that sets up the arrangement with the agreement of the supplier.
Invoice financing involves a finance provider loaning up to 90% of an outstanding invoice to the supplier of the goods or services that have been delivered to a buyer. The supplier is responsible for chasing up the invoice from the buyer and paying back the finance provider.
It is the supplier that sets up the arrangement and the supplier that pays the fee for the service.
The buyer doesn’t need to be aware of the loan and pays the invoice as normal to the company on maturity.
Reverse factoring allows you to release cash quickly from your unpaid invoices.
As your lender, we can release up to 90% of your invoices within 24 hours. On payment of the invoice from your customers, we will then release the final amount minus any fees and charges. There are different types of invoice financing options available to businesses depending on the situation and the level of control they require in collecting unpaid invoices.
We are an invoice financing company who offer a solution whereby payments are collected on your behalf managed by our team of expert credit controllers so you can focus on running your business. Our Confidential Invoice Discounting solution is offered to businesses who want to maintain their own credit control processes, therefore this remains strictly confidential so your customers are unaware of our involvement.
Hitachi made the process of moving factoring facilities painless, bearing in mind we previously had our facility with the same provider since 1997. I cant fault Hitachi's staff and processes and we are delighted with the move.
10:45, October 21, 2021
Staff excellent all together professional
05:57, October 03, 2021
Great service so far
14:20, August 27, 2021
Game-changer for our transport business
16:29, August 07, 2021
Excellent customer support
11:53, August 06, 2021
Reverse factoring and factoring are both forms of finance that involve selling invoices to a 3rd party finance provider who pays part or all of the value of the invoice.
The difference between the 2 is in who organises the finance.
Reverse factoring involves the buyer of the goods or services arranging for a finance provider to pay the outstanding invoice to the supplier. The arrangement is carried out with the agreement of the supplier and the buyer pays back the finance provider the invoice amount plus interest on its maturity.
Factoring involves the supplier selling a buyers invoice to a finance provider. The finance provider pays the value of the invoice to the supplier for a fee. The finance provider then chases up payment from the buyer.
Supply chain finance is where a supplier can receive payment on their invoices quickly and earlier than waiting for the invoices maturity date. It involves the buyer selling its invoice to a 3rd party finance provider with the agreement of the supplier. It is the same as and is sometimes called reverse factoring.
Supply chain finance is sometimes referred to as factoring.
By referring to it as factoring it allows it to be left off the balance sheet as a debt.
As factoring involves finance that doesn’t come from equity investors or lenders and is relying on future payment from the buyer to the factor then because this is out of the company’s control it can be taken as a contingent asset.