Invoice financing: concepts and benefits

SMEs need to constantly grow, but invoices issued by their clients in the long term prevent them from having enough liquidity to pay for other needs of their business, such as paying their suppliers. Growing companies need to efficiently manage their cash flows, and they have found a solution through invoice financing. There are different methods of financing invoices, as we will discuss below.

Differences between factoring, invoice discounting, and commercial discounting concepts. Invoice discounting, factoring, and commercial discounting are short-term financing tools used by companies to obtain liquidity and solve working capital problems. Although they seem synonymous, they have some differences. Factoring is a contract in which a company typically assigns all its credits to a finance company to manage its collection and advance invoices. The difference is that factoring involves a longer-term relationship between the parties. Invoice discounting involves the sale of invoices or promissory notes to a financial institution in exchange for interest and perhaps a commission. The difference is that factoring is a contract for the assignment and management of invoices, while invoice discounting involves selling them. In commercial discounting, the difference is that the instrument is not an invoice, but another payment method that one company sends to another with a specified maturity date, such as a promissory note. In all operations, the financial institution advances the money, either from the invoice or the promissory note, in exchange for a small amount, but the conditions of the advance are different. To clarify, let's say that factoring encompasses invoice discounting and commercial discounting. Since we are reviewing concepts, let's remember crowdfactoring, which is what we do at Inversa. Crowdfactoring is a type of non-bank alternative financing through an online platform where companies anticipate the collection of invoices they issue to their customers through contributions from investors, who receive a return in exchange. If you want to further expand concepts about crowdfactoring. Crowdfactoring, by using an online platform, streamlines processes, reduces intermediaries, and also does not require the assignment of all credit, allowing the assignor to decide which invoices to finance and when to do so. Benefits of crowdfactoring at Inversa:

• Shortens collection time: this way, the necessary liquidity is obtained in cash flow.
• Greater economic stability and access to resources.
• You won't have to contract any additional products to finance yourself.
• Does not affect CIRBE: financing your invoices with us will not affect your credit rating.
• Speed: we will respond within 24-48 hours.
• Transparency: the information is clear, we clarify any doubts you may have, and obviously there are no hidden costs.

What do you think? Are you convinced? Start financing your invoices now!