Invoice purchase is a solution that many companies take advantage of. It makes sense especially for companies with few but large invoices – where liquidity easily gets low when cash is tied up in non-liquid assets. If for some reason a business partner a business partner doesn’t fulfil their promises, it’s possible to sell your invoice to a factoring company get paid directly and potentially avoid a lot of time consuming working .

What is factoring: invoice purchase and lending

In short: You always want to make sure that you get the payment as quickly as possible, to ensure high liquidity in the company. When someone fails to make payment on time, instead of waiting for the customer to pay – it is possible to sell the invoices and get paid immediately. There are several factoring companies who are willing to buy your costumers unpaid invoices,

If you choose to sell your invoice, the buyer will handle everything surrounding the invoice and also take the full financial risk. However you will not always get the full value out of your invoices, this is partly because factoring companies needs to hedge against potential credit risk.

There is also the alternative of opting for invoice lending; this means, that instead of selling your asset, you borrow money based on the amount stated on the invoice.  Business invoice financing in the shape of a loan are secured by the underlying debt assets (invoices).

Worth knowing about invoice purchase

You get your payment quickly when you sell an invoice. That’s the whole benefit of it.

The process is relatively straight forward and it’s easy to get going once you find a marketplace for invoice purchases, or a site that connects factoring companies with sellers.

Valuation: How much you get paid per invoice depends on several different things. First and foremost, it settles on the amount stated on the invoice: But the customer’s creditworthiness, as well as the stipulated invoice payment terms, is also taken into account during the evaluation process. The price you agree on will be transferred to your bank account swiftly, often in a day or two, should you choose to sell your invoice.

Upon establishing a contract, you choose whether you just want to sell invoices occasionally or regularly.

How to sell an invoice

So far, so good – now you gathered some little knowledge about invoice purchases. But how to get started selling an invoice? 

You simply find a marketplace or a factoring company and send your invoice off. If it is possible to find a buyer, you will quickly get a payment and that’s really all there is to it.

The invoice must of course first be approved, but usually, this process won’t take long. It is therefore quite simple to get started with invoice purchases and sales of unpaid invoices.

To summarize: Invoice purchase is a good solution if you want to secure liquidity and if you do not want the “headaches” of debt collection.

Factoring turns non-liquid assets into liquid assets, which is a key component for company growth and sustainable cash flows.