How to put your business in reverse to go forward – reverse factoring

 In Invoice Finance, Project Finance

A variation of factoring that has been gaining traction in the US and Europe is “reverse factoring,” in which the factor purchases only selected receivables based on the high credit quality of the buyer.

In this case, suppliers who do substantial business with large, financially strong buyers are able to obtain more favorable terms from the factors while retaining the liabilities for collecting receivables from less creditworthy buyers.

For most factors, reverse factoring is a NO GO zone!

More often than not, they’ll want your whole debtors book. Moreover, they’ll also usually require a fixed asset.

This is partly due to risk, but mostly due to the inflexibility of their products and the shackles placed on them by parent financiers – often a traditional funder such as a bank.

In simple terms reverse factoring is a series of approaches rather than a singular product.

As stated above, the accounts receivables of a single client can be factored. Another way to skin the cat and achieve the same result is through one-off transactions.

The vehicle in this case being purchase order finance –

So before you hang your head in defeat and give up your whole debtors book ask some questions and shop around.

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