If you’re considering alternative finance for your business, you’ll no doubt be interested in learning about invoice trading to determine whether it may be right for you.
What is invoice finance?
In order to understand invoice trading, you first need to know what invoice finance is. You can read all about it in our article called ‘The Future of SME Financing’ but in short, it is the practice of selling outstanding invoices in order to access the cash locked up in those invoices without having to wait weeks or months for customers/clients to settle those invoices.
What is invoice trading?
Invoice trading is a form of invoice finance whereby businesses can sell their outstanding invoices directly to a network of investors via an online, centralised platform.
How does invoice trading work?
To trade invoices in this way, a business lists one or more unpaid invoices on the platform. For each invoice, price is set automatically by the platform based on the upfront agreement. This includes the advance rate (percentage of the value of the invoice that the business will receive as cash upfront – usually between 70% and 90%) and the discount rate (the interest rate the seller pays – usually between 0.8% and 1.5% per 30 days). The business pays a fee to use the platform.
Investors also pay a fee to use the platform. In exchange, they are able to purchase for all or part of the sum of each unpaid invoice in a live trade. The seller receives their cash advance from the winning investor/s and when the invoice is finally settled by the debtor, the seller repays the advance to the investor/s plus the agreed interest. Any remainder is then returned to the seller.
How InvoiceInterchange’s invoice trading platform works
Here at InvoiceInterchange, we pride ourselves on our fast and flexible invoice financing services. We don’t require lock-in or long-term contracts nor to do we have a minimum number of invoices that must be traded. If you choose to sell your business’ outstanding invoices on our platform, you will receive your cash advance on the day the trade closes.
So, don’t worry about business cash flow a minute longer. Get in touch with us to find out how we can help you start solving your cash flow challenges today.