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| REVERSE FACTORING |
Industry Terminology used in Reverse Factoring:
- Negative Financing
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Supplier Financing
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Buyer Based Supplier Finance
A problem facing
many small businesses is getting financing, especially financing during the
supplier's production cycle. Many small businesses, especially those in
emerging markets, do not have the credit worthiness to obtain good financing
terms. What is unique about Reverse Factoring is that the financing for the
supplier's receivables is solely based on the credit worthiness of the buyer and
not of the supplier. The buyer, who is usually a large solvent company with
excellent financial ratios, has a prearranged agreement with the bank to
guarantee payment for specific invoices. If the supplier agrees, the bank will
then extend liquidity to the supplier based on the credit risk of the high
quality buyer and not of the high risk supplier. When the buyer makes a
payment, the bank closes the financing loan minus interest/fees and remits the
balance to the supplier. The advantage of Reverse Factoring is that it is an
attractive financing tool that allows the buyer the benefit of longer payment
terms, while providing high risk suppliers with immediate working capital at low
financing rates.
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Solution Highlights
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Automated uploading of approved Payables Files
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Approved sellers have access rights to select specific invoices for
financing (from the pre-approved invoices from the buyer)
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Straight-through processing to reduce costs, errors, omissions, and
fragmented manual processes
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Automated data uploading and bi-directional sharing of data and
communications
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Clients have access to input, query, correspondence services, and client
account updates
- Buyers
and Sellers have access to automated reporting (including credit
experience), to simplify collections
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Detailed information access, such as multilevel reporting and monitoring,
on-line dashboards and analytics, daily activity and settlement reports
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Improved internal controls and risk management to meet Sarbanes-Oxley and
regulatory adherence requirements
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Transaction audit trails, stored documentation, multi-level reporting,
alerts, and notifications
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Seamless integration with existing support infrastructure through major
vendor and industry standards
- Built
on interoperable technologies, including Java/J2EE/ XML, and SWIFT
- System
security that provides for user access control and authentication, which can
be incorporated into the company's own security environment
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Business
Benefits
This product allows Banks and other Financial Institutions to provide maximum
working capital to their Customer Base in a time frame the competition cannot
match
- Increase
working capital leverage
- Streamline
the receivables process
- Increase
liquidity and operational efficiency
- Enhance
visibility into cash management, with great agility
- Improve cash
flow and reduce outstanding debt
- Provide
faster financing for the customer
- Generate
opportunities for better suppliers and better supplier pricing
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