Monthly Archives: February 2017

Single Invoice Finance Options to Choose From

Invoice letter head with pen and calculator / selective focusIn this world, being given options can either be a treat or a challenge. For the former, this allows us to dabble into alternatives. We get to take a look at the potential of each one and this enables us to adapt and to incorporate the best possible choice for our needs. As for the latter, it can be taxing in the sense that they can be overwhelming. It’s not uncommon for people to be confused when presented with various ways of doing things. Single Invoice Finance is no different.

This strategic process of raising financial resources against individual invoices has more categories under its umbrella. For us, it is important to carefully understand what each one presents so that we can decide and assess if they’re the perfect fit.

  • Factoring – In this method, the right to collect against the invoice is sold to the provider, called a factor. In other words, the responsibility and burden of collection is passed on to and assumed by the factor. The amount received as an advance will only be around 80-95% of the total invoice value with the remainder held by the factor until complete collection is achieved. Once done, it shall then forward the remaining value less fees to the company.
  • Discounting – Here, the responsibility of collection is retained by the business. The invoice is used as a form of security in exchange for the advance. After maturity and once collection is completed, the company shall then repay the provider for the cash advanced plus fees.
  • Confidential – Specifically applied in a factoring arrangement, some entities choose to make the transaction confidential. This leaves the customer to whom the invoice is attached to out of the picture so as to avoid confusion when collection period rolls in.
  • Disclosed – The complete opposite of a confidential agreement, this fully discloses the use of the invoice to generate additional cash for the business entity.
  • Funding Limits – Also known as with recourse financing, this alternative stipulates that in the event that the financing institution cannot collect against the invoice due to the owing customer’s non-compliance, the company is required to buy the invoice back.
  • Without Recourse – This single invoice finance option strips away the risk of nonpayment for the company. Should the owing customer fail to completely pay on time or at all, the loss shall be absorbed by the financial provider.