The 8 keys of crowdfactoring platforms

Crowdfactoring platforms help companies in the real economy to obtain liquidity and savers to make their money profitable

Automate, automate, and automate. Task automation is one of today's top business objectives. Disruptive technologies such as Artificial Intelligence are precisely along these lines. Automation is making its way into all economic sectors and does not only affect businesses. Citizens are also benefiting from many automation in their daily lives thanks to software, IoT devices, and other tools.

The financial sector does not remain on the sidelines of this trend—quite the contrary. Traditional banking institutions and FinTechs are betting on automation and digitization to offer better services to their customers. In this context, innovative projects such as crowdfactoring platforms are born, designed, and implemented to function as a meeting point between companies in the real economy and individuals willing to invest in them.

Crowdfactoring platforms, such as Inversa Invoice Market, use automation to facilitate the access of startups, SMEs, and small investors to the financial sector. The robust technological development on which they are based allows them to streamline procedures, offer all relevant information about invoices and companies, and provide autonomy to businesses and investors.

Below, we will explore the 8 keys to crowdfactoring platforms that make them attractive financing and investment channels for actual economy companies and savers.

1. Reduced intermediation and transaction costs

As we have just pointed out, process automation is fundamental in crowdfactoring platforms. Thanks to AI and algorithms, crowdfactoring platforms can automate some of the most relevant processes when carrying out factoring operations: product contracting, credit rating, and risk analysis…
These actions are essential to enable individuals to invest in a given invoice. They not only serve to close the purchase but also provide important information such as the scoring and the risk level of the operation.

These issues translate into an exciting consequence for investors and companies seeking financing on crowdfactoring platforms. What is it? The intermediation and transaction costs charged by crowdfactoring media are minimal and much lower than those set by entities in the traditional financial sector.

The automation causes the operating costs of crowdfactoring platforms to be low, and, in addition, they do not participate in the decision-making about the invoices in which they invest, as it happens in the case of the banking sector.

In Inversa, the intermediation costs, besides being very low, are borne by the company that offers its uncollected invoices. Never the investor.

2. High profitability in a controlled risk scenario

One of the fundamental pillars of investment strategies is the profitability sought. It does not matter whether we are talking about classic investment products or investments through crowdfactoring platforms, crowdlending or other forms of alternative online financing.

Well, one of the keys to crowdfactoring platforms is precisely the returns they offer to customers who invest in invoices.

Until the inflationary spiral last year, interest rates were low, which caused many investors to seek a higher return for their money in alternative financing. This was a boon for the growth of crowdfactoring platforms.

After the latest interest rate hikes, approved by the ECB to contain inflation, traditional investment products are again attractive. But crowdfactoring platforms still need to stand out for the profitability they offer in risk-controlled scenarios.

When deciding which invoices to invest in, savers know the credit rating of the company that is to pay the invoice and can judge for themselves the relationship between the profitability of the investment and the risk of the operation.

3. Achieving profitability and short-term payback

When investors deliberate on which products or companies they wish to invest in, they not only consider the return offered by each available alternative. It is also essential to determine how long it will take to obtain profitability and, above all, how long it will take to recover the investment made.

As far as crowdfactoring platforms such as Inversa are concerned, both deadlines are short. Above all, the one of obtaining profitability.

• Profitability: In the Inversa Invoice Market, investors receive the payment of the profitability in advance. When an invoice is financed, all investors who have invested their money in it receive the committed profitability.
• Payback: The payback period usually ranges from 30 to 90 days, depending on the maturity of the purchase invoice, which is never more than 180 days. This means that investors will not see their money held up for years but that the investment will pay off quickly.

Agile investments for an increasingly liquid world.

4. Ability to sell investments to obtain liquidity

The agility and autonomy when investing are reinforced by an exciting option of some crowdfactoring platforms, such as Inversa: to go to the secondary market of invoices.

In addition to the primary market, in which ceding companies offer invoices to be paid by their debtor clients, Inversa's marketplace has a secondary market. In this marketplace, investors can sell their investments to other individuals. What do they achieve with this option? To obtain liquidity to make new investments.

And what do investors who buy bills on the secondary market gain? To invest in bills of exchange that are of interest to them but which they missed in the primary market.

So not only do we have the fact that the investments are recovered in a very short period, which never exceeds half a year, but it is also possible to sell the assets and recover the liquid money at any time.

5. Facilitating the financing of startups and SMEs

One of the hallmarks of crowdfactoring platforms is their commitment to helping startups and SMEs obtain liquidity.

Large companies and well-established businesses have fewer problems in obtaining financing. However, innovative projects in their early stages of life and small and medium-sized companies need help to bring all the liquidity they need, whether it is to get started, grow, face difficulties successfully, invest, or expand into new markets.

Financing is needed throughout the entire life cycle of a business. And startups and SMEs play a crucial role in our society and our productive fabric. So helping them to finance themselves is an action of great value.

The nature of crowdfactoring platforms encourages companies in the real economy and innovative projects to opt for this alternative means of financing to complement the liquidity they obtain in the traditional financial sector.

In a few days, a company can finance an invoice and obtain liquidity to take advantage of any business or investment opportunity.

The operation of crowdfactoring platforms is effortless and requires neither collateral nor guarantees. Moreover, financing invoices on crowdfactoring platforms does not compute in CIRBE, so it does not affect the credit rating of companies.

6. Allowing small investors to make the most of their savings

In addition to helping SMEs and startups participate in the financial sector, crowdfactoring platforms are also vital to democratizing investments. For example, to invest in Inversa's marketplace, all you need is 20 euros—a couple of drinks on a Saturday night. Nothing else is required. This means that small investors can invest and monetize their savings through crowdfactoring platforms without having to have large amounts of money.

The sum of many small investors can achieve great things. The very concept of crowdfactoring is based on this idea.

The investment arena is now for more than just large investors. Small savers can also play a role in financing real-economy companies and startups, make the most of their savings and, in the process, contribute to building a more sustainable world.

7. Diversify investments and risk

Crowdfactoring platforms house multiple invoices from different assignors to be paid by various debtors and with a wide variety of returns, risks, and amounts. In other words, they offer a wide range of products in which to invest.

Also, as we have just pointed out, in crowdfactoring platforms such as Inversa, it is possible to invest tiny amounts of money.

The sum of both issues makes it possible for savers to diversify their investments as much as they like. And, with them, the risk to which they are exposed.

For example, if an investor has 1,000 euros to invest, he can diversify his investment among multiple bills. Thus, he can invest 500 euros in the invoice of a company he has already trusted on other occasions. 200 euros in an insured invoice. And 300 euros in an invoice that offers a high return but also presents a higher level of risk than the other two.

The investment options are practically endless.

8. Crowdfactoring platforms: The importance of reaching underserved companies and investors

The business fabric of Spain and the European Union is vast. However, after the financial crisis of 2008, the number of banking institutions has shrunk dramatically, which means the traditional banking sector is less diverse than the productive fabric.

Crowdfactoring and crowdlending platforms contribute to diversifying the financial sector and opening alternative financing channels for companies that have gone unnoticed by banks.

Startups and SMEs can find in crowdfactoring platforms other channels to obtain liquidity and have more room for maneuvering when planning their finances and investments.

The same applies to small investors since crowdfactoring platforms open their doors wide open to them so that they can make their investments autonomously and make the most of their money, as large investors have been doing for centuries.

Therefore, crowdfactoring platforms and other alternative financing methods do not replace banks when it comes to facilitating financing and investment but complement them, reaching companies and savers who have been left out of the spotlight.