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6 keys to investing in factoring

It all starts with an invoice. A document that is given to the buyers of a product or the customers of a service and that summarizes the information of the commercial transaction. But this document can also be profitable for savers commited to investing in factoring to increase their capital.

The operation of this method is similar to the other systems: people sow with the intention of harvesting in the future. Therefore, they sacrifice a small part of their fortune, which they will recover later with a profit. However, invoice financing is not a conventional alternative.

On the contrary, factoring has several characteristics that differentiate it from other options and make it more attractive to a certain investor profile. But what is essential to know before investing in factoring?

1. What is factoring

Investing in factoring without a deep understanding of how it works would be imprudent. However, at the end of the day, people’s savings are at stake, so it is essential to know what you are investing in.

Factoring is a system whereby companies assign investors the rights to collect the invoices they issue to their customers. The latter advance this amount, and, in return, the companies reward them with a small interest, which will vary according to the amount invested, the maturity date and the risk associated with the operation.

Cash-strapped organizations can easily make money available to meet their debts through this method. However, if they had to wait for the customer to pay the invoice, they could face severe financial problems. For this reason, they prefer to sacrifice a percentage in exchange for receiving the money sooner.

In addition, factoring helps them to diversify their sources of credit without relying exclusively on banks.

Most of these operations are carried out through online platforms. This makes factoring a very accessible system for both businesses and investors. A case in point is the invoice marketplace developed by Inversa Invoice Market.

In recent years, there has been a proliferation of firms dedicated to providing these services, which provide the capital in full and offer very juicy conditions for companies. Even the banks themselves have adapted to this new scenario. However, as we see below, turning to individuals brings more benefits.

2. Hand in hand, the better: the rise of crowdfactoring

Joining forces always pays off. Especially when the objective is investing in factoring.

For this reason, a factoring modality with a strong decentralizing character has emerged: crowdfactoring. As a result, it is no longer a single person or firm that monopolizes the investment but rather the contributions of various savers who collaborate on an individual level with the amount they consider most appropriate.

Crowdfactoring has many advantages over the original formula. To begin with, businesses can further diversify their sources of credit. If one of the investors withdraws its support, it can continue to rely on the others. On the other hand, if you only depend on one investor, you are practically at their mercy.

In addition, the accessibility of crowdfactoring is formidable, as it opens the door to small savers who want to invest in factoring with less significant volumes of money. Thanks to this method, they can participate in the investment since they join together to reach the amount demanded by the company.

3. A high degree of flexibility, profitability and simplicity

People who decide to invest in factoring enjoy many facilities to determine and negotiate the terms of the operation. And if these do not meet their requirements, they can look for another company that better suits their conditions. It is not a rigid method but accommodates the needs of both parties with flexibility and it suits all kinds os investment strategies.

In general, it is a formula that works in the short term. And, just as the organization obtains liquidity quickly, the saver takes little time to reap the benefits. Some operations are concluded within a few weeks. Others within a few months.

In any case, the investor does not have to wait years to reap what he has sown. And if he wants to make more profit, he can opt for options with a higher level of risk, as they usually offer more profitability to encourage investment. It’s all up to the consumer.

These operations occur on online alternative financing platforms such as Inversa Invoice Market. This alternative was created in Spain based on transparency, agility and simplicity. With Inversa, those who wish to get started only need a device with an internet connection and twenty euros.

It is possible to start investing in factoring with small amounts of money

4. The footprint of ethical investment when investing in factoring

What differentiates platforms like Inversa from other players in the market? Many new firms ensure to incorporate the ethical component in all their activities. In this line, they prioritize and value projects that seek to improve their social and environmental environment.

Savers who share these values will find in crowdfactoring a system that will give them great satisfaction, as they will not only receive an economic benefit. But, at the same time, they will be responsible for positively impacting the planet or society. Furthermore, they will see first-hand how the value of their money is multiplied by investing in factoring.

In this way, they become levers of prosperity and progress in their communities. Instead of fattening the big multinationals, which focus on the most lucrative aspects, they boost real people.

By investing ethically, they help their family, friends and neighbors launch their projects and are responsible for keeping local businesses open.

5. What types of factoring exist

When investing in factoring, it is essential to understand that factoring is not a rigid system. There is no single type of factoring. Instead, depending on who bears the risk of non-payment, the scope of the transaction and which parties are aware of it, we can differentiate between different types.

Suppose the due date arrives, and the company’s customer still needs to pay the invoice. Who is responsible for the debt? The company assumes this delay in recourse factoring and must return the money to the saver. In non-recourse factoring, the investor cannot demand that the business rectify the debt and must claim it directly from the customer.

On the other hand, when the factoring operation is formalized, the assignee and the assignor may or may not inform the client of the company. In the first case, this would be factoring with notification. However, if the customer is unaware, it would be factoring without notification.

Finally, it should be noted that in domestic factoring, all the actors involved in the operation are part of the same country. In contrast, it is considered international factoring if the agreement crosses borders.

6. Choosing the right time to invest in factoring

In the last decade, the number of people fleeing conventional financial institutions has grown considerably. The reasons for this are very diverse: loss of confidence in banks, the search for better conditions, and the desire to diversify the investment portfolio…

However, before investing in factoring, it is important to know all the risks. There are times, for example, when the economic situation is more favorable for certain companies. In addition, savers should only invest within their means, as their financial stability could be at stake.

While in the past, there were still some misgivings about investing in factoring or crowdlending, these types of systems are now widely accepted by the financial community. Nowadays, both modest savers and managers of multinationals can finance invoices.

Everyone has a place in factoring.

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