Invoice Factoring: A Guide to Early Payment For Businesses

Sold an invoice but waiting to get paid? Factoring is a way of turning your unpaid invoices into cash, so you can stop waiting and start growing. Your buyer has agreed to pay you for the goods/services that you have supplied as per the agreed terms over a credit period. However, you would prefer to receive your payment early and reduce your working capital cycle and credit risk. This receivable can be unlocked by assigning it to an appropriate Financier. Factoring will enable you to get early liquidity while delivering on credit sales.

Your invoice will be sent to your factoring provider, who gives you the majority of your invoice value (minus fees).

What is Invoice Factoring?

Invoice factoring is a form of invoice finance, it is designed for businesses that invoice their customers and receive payment for the period of time. An invoice factoring provider lends against your customer invoices, enabling you to receive most of your invoice cash value immediately rather than waiting weeks or months to get paid.

Invoice finance can give you additional flexibility by unlocking the cash tied up in your unpaid invoices and gives your business access to funds for as long as you need them. As a leading provider of invoice finance, our expertise can help you manage your cash flow cycles and improve your balance sheet.

Features of Invoice Factoring:

• Unsecured Line of Credit offered to Sellers for sale to their reputed Buyers.

• Avoids any loan agreement with the buyer.

• Technology integration with Corporate’s ERP OR use of Mynd Portal for seamless flow of invoice information across the Corporate, Debtor, Mynd and the Lender.

• Limits of up to Rs. 100 Crore per Corporate and Rs. 20 Crore per your Buyer.

• Up to 120 days flexible repayment terms of an invoice.

How Invoice Factoring Companies Work?

Invoice Factoring Companies works in following manners

1. One Time Credit Limit Set-up

• Limit amount and credit period limit  finalized basis risk assessment of the Buyer. 

• Digital on-boarding of the Seller and Buyer.

• One-time Notice of Assignment signed by Seller and accepted by the Buyer for accepted invoice.

2. Digital flow of Buyer confirmed invoices

• Integration with ERP of Corporate  for online invoice flow.

• System for uploading digitally signed invoices, if ERP integration is not available.

3.  Online Disbursement

• Buyer confirmed invoices funded within 24 hours.

• Disbursement done in Seller’s designated bank account.

• Limits revised post each disbursement.

4. Online Repayment before the due date

• Flexibility for Anchor to pay Lender anytime prior to the due date.

• NACH presented on the due date for payment from Anchor to the Lender.

• Limits get replenished after every payment..

Benefits of Invoice Factoring

1. Lenders

• Access to new and profitable lending opportunities with very less or no investment.

• Funding of a confirmed end-purpose.

• Digital and standardized underwriting process.

• Easy to scale-up.

2. Sellers

• Access to early liquidity against goods and services provided to Buyer.

• De-risking of receivables.

• Off-balance sheet funding.

3. Buyers

• Healthier Supply Chain.

• Additional lever to negotiate down procurement prices.

• Higher stickiness of Sellers.

Conclusion

 Invoice Factoring is a simple, easy to use and cost effective solution. It is suitable for small and large businesses, both cash flow positive or not. Factoring offers cash flow to businesses that they wouldn’t otherwise have, allowing them to pay down debt, support growth or simply plan for the future without worrying about the burdens of unpredictable cash flow.

At Mynd Fintech, we believe that business factoring is an effective way of unlocking cash trapped in your company’s accounts receivables. It’s a way to get paid sooner and reduce credit risk. If your business has a steady cash flow but is waiting too long to get paid on outstanding invoices, then invoice factoring might be the solution you need.