Opposite to normal factoring, reverse factoring is focused on the purchasing line. The suppliers are included and are paid more quickly, meaning there are advantages for all parties concerned. Reverse factoring always involves a three-party relationship.
Such a financing contract, which is independant of banks, is initiated by the client.
It will be a three-way contract between the client, the supplier and the factoring company. The supplier sends invoices as usual to the client. The client confirms to the reverse factorer that the invoice is correct. The factorer takes over the claim and transfers 100% of the amount to the supplier – often on the same day, at the latest within days of the invoice date. At the end of the term of payment the client pays the invoice amount, plus the accumulated interest, to the factoring company. The transactions can be dealt with quickly and apply also to international business relationships.
Customer Benefits:
- Improvement of liquidity through lengthened purchasing payment targets
- Possible cash discount received through immediate payment of suppliers
- Improvement of balance sheet structure
Supplier Benefits:
- 100% of the payment received within just a few days
- Relocation of accounts receivables risk to the financially-strong factorer
- The client generally assumes the cost of the procedure
- Balance discharge, because it is true factorisation
Are you interested in reverse factoring? If so, we will find you the right partner with market-conform terms. Talk to us.