Reverse Factoring

What is Reverse Factoring?

Also known as supply chain finance or supplier finance, reverse factoring involves a funder advancing payment to its clients’ suppliers at an accelerated rate, giving both parties a number of benefits.

Reverse factoring differs from traditional factoring in that it is the buyer, not the supplier who initiates the funding. It is designed to provide value to all three parties involved: The buyer, the supplier and the funding facility.

The supplier, for instance, can trade with customers that demand longer payment terms than normal without tying up cash flow for long periods, accessing up to 100% of the invoice value well in advance of its due date. The buyer, meanwhile, can take advantage of early settlement discounts and foster strong relationships with their suppliers.

The factoring company creates a more durable business relationship, as all parties benefit. When working with large ordering companies, they are also able to reach suppliers more easily than reaching out to each supplier company individually.

As a specialist and experienced invoice finance broker, we can help businesses to secure the most suitable factoring facilities for their requirements. Call our team of reverse factoring experts on 0800 9774833 to find out how we can help, or get an instant quote using the tool below:

How does reverse factoring work?

A business orders goods from their supplier
The goods are sent and an invoice is sent to the customer
The customer approves the invoice and sends it to the reverse factoring provider
The invoice value is advanced to the supplier
The customer pays the invoice value to the funder when it becomes due

Benefits of reverse factoring

Beneficial for both the customer and supplier, strengthening the supply chain and increasing loyalty
The supplier will benefit from a vastly improved cash flow and access more funding than they’re typically able to under a normal factoring agreement
The buyer can benefit from early settlement discounts without compromising cash flow, as well as better relationships with their suppliers
Funding is secured against the buyer’s creditworthiness rather than its assets or personal guarantees
Reverse factoring can be used whether suppliers are based domestically or overseas
Invoices are validated before being paid, reducing the likelihood of problems concerning the payment of the invoice
There’s less administration on both sides, as suppliers won’t have to chase payments and buyers only have to deal with making payments to one company

See how factoring enabled our client to take on a new contract

How Hilton-Baird can help

As an independent commercial finance broker that specialises in asset based finance, we have access to the leading factoring companies on the market to ensure you can secure the most suitable facility.

Call our team on 0800 9774833 or request a call back at a more convenient time to discuss your requirements and discover how we can add value to your search.