Reverse factoring is a form of financing that allows you to sell your accounts receivables to a third party. In other words, instead of waiting for customers to pay you for the goods or services that you’ve already delivered, reverse factoring allows you to receive funds from a lender before those invoices are paid. Since the money comes from a third party and not directly from your customers, it frees up capital in your business—a benefit that can help grow your company faster than ever before.
Reverse factoring is the name of an alternative financing method where you sell your invoices to an investor and get paid immediately. Instead of going through a traditional bank, you can apply with a reverse factoring company. The process is pretty simple:
· Your business sells its unpaid invoices for cash up front, usually at a discount
· The buyer pays once they receive payment from the customer on invoice (the “factored account”)
Reverse factoring is often used by companies that need extra capital quickly and don’t have time to wait for traditional financing methods to be approved or rejected
The process of reverse factoring is simple. The factor gives you an advance on your invoices, and when the money from those invoices is collected, you pay back the factor in full. That's it!
You can use this cash flow to fund growth or pay down debt—whatever makes sense for your business. The nice thing about factoring is that there are no long-term contracts or commitments; you only have to sign a contract if and when you need it. You can also cancel at any time if things aren’t working out for some reason.*
Reverse Factoring is a great way to get cash flow, as well as money for your business. When you use reverse factoring, you’re essentially selling your invoices at a discount in exchange for immediate funding. This can help you free up capital and give you the opportunity to invest in things that are more important than paying off old bills.
If you're looking for financing options for your business or want to use funding for growth, reverse factoring may be the right choice for your company. It's popular among small businesses because it allows them to quickly access cash by selling their outstanding invoices upfront -- which means companies don't have to wait months before they can receive funds from suppliers and customers!
As mentioned above, the money you make from reverse factoring will typically be in the form of a cash advance. This can be a huge help for your business because it frees up capital that would otherwise have to be used for paying your suppliers.
With this new found cash, you can use it to grow your business in any number of ways:
· Invest in new equipment or hire employees. If the demand for your product has slowed down due to competition or other factors, an influx of cash could help you meet that demand by hiring more people or buying more machines.
· Take on new clients. If there is still plenty of demand for your products but lack of funds is preventing you from filling orders quickly enough, reverse factoring could finance those orders so that they get filled faster than ever before!
We are so excited about the possibilities for reverse factoring. While there may be some skeptics out there, we believe it can be a valuable tool for businesses of all sizes. If you’re interested in learning more about how reverse factoring might benefit your business, contact us today!