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Reverse Factoring

Reverse Factoring

Strengthen your supply chain
and your working capital

Reverse Factoring allows corporate buyers to secure longer payment terms while providing suppliers with liquidity when they need it. This gives you and your suppliers financial flexibility and creates a sustainable process, strengthening both new and existing business relationships.

With the Traxpay platform, you can quickly and efficiently take advantage of the benefits of Reverse Factoring while working with a financing partner or the bank of your choice.

We would be happy to explain the service in greater detail, outlining how you too can benefit from Reverse Factoring. Please contact us!

 

Download our factsheet on Reverse Factoring

Traxpay Financing platform

What is Reverse Factoring?

On average, suppliers in must wait more than 73 days for payment (source: Coface Credit Insurance). A long time – too long for some suppliers – between the payment for e.g., production-related raw materials and receipt of funds from their customers. Bridging this period with their own liquidity can be a real burden, especially if a company is small and /or growing rapidly. At the same time, many buyers are unable or unwilling to pay earlier.

Reverse Factoring solves this problem for both sides. It enables your suppliers to be paid more quickly, while you, as the buyer, do not settle the invoice until the agreed due date or beyond.

Unlike traditional factoring, Reverse Factoring is not initiated by the supplier, but by you, the buyer. In doing so, you can also leverage your credit rating to extend your own payment terms for your supplier invoices.

Reverse Factoring is implemented with the help of a third party, the financing partner. If your supplier wants to be paid earlier, an invoice can be accelerated, increasing liquidity. The corporate buyer can support this process and make it happen. In this case, your supplier sells his receivables to a financing partner, often the bank of your choice. In return, your supplier receives his money immediately from the financing partner. The default risk (i.e., the risk that you will not pay) is transferred from the supplier to the financing partner. Your suppliers can save costs for credit default insurance (where needed) while receiving an immediate inflow of funds. The financing partner charges a discount – also known as a financing discount – for the purchase of the receivable(s). The discount, which is based on the creditworthiness of the corporate buyer, is adjusted by the financing term.

The discount is almost always more favorable for suppliers, than financing directly through banks or a factoring company. . As a buyer, you have the opportunity to extend your payment terms and thus improve your own working capital position. Your suppliers’ performance and liquidity, as well as your own, remain stable thanks to supplier financing.

Reverse Factoring thus represents a WIN-WIN situation supporting you and your suppliers to grow together and in partnership, in the spirit of a strong supply chain.

Reverse Factoring made easy
with Traxpay

Here’s how our financing platform can help you with supplier financing:

  • Intuitive user interface to our browser-based system
  • More reach and flexibility in the supply chain
  • No changes to existing processes including trade terms
  • Unified reporting
  • Benefits from Traxpay’s experience in supplier communication and onboarding
  • Choice of programs as well as supporting products for a stable supply chain at all times

Advantages Reverse Factoring for buyers

1

Longer payment terms for the purchase of goods and services without straining the supplier relationship

2

Provision of the necessary liquidity by (house) banks or new alternative financing partners

3

Improvement of key (working capital) ratios as well as the balance sheet structure which can enhance the buyer’s credit rating

Advantages of Reverse Factoring for suppliers

1

Earlier / additional source of liquidity; receivables are paid in full and before maturity

2

Risk of non-payment is transferred to the financing partner

3

Liabilities to upstream suppliers can be paid more quickly and easily often creating improved purchasing terms

Advantages Reverse Factoring for buyers

1

Longer payment terms for the purchase of goods and services without straining the supplier relationship

2

Provision of the necessary liquidity by (house) banks or new alternative financing partners

3

Improvement of key (working capital) ratios as well as the balance sheet structure which can enhance the buyer’s credit rating

Advantages of Reverse Factoring for suppliers

1

Earlier / additional source of liquidity; receivables are paid in full and before maturity

2

Risk of non-payment is transferred to the financing partner

3

Liabilities to upstream suppliers can be paid more quickly and easily often creating improved purchasing terms

Any questions?

Portrait Claus-Mário Büschelberger | Traxpay
  • Claus-Mário Büschelberger
  • Senior Director – Corporate Clients EMEA
  • +49 695 977 215 39
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