Reverse Factoring In India and Its Advantages!


In the business world struggling with cash flow management is a normal thing, and not only small or new start-up but also many established businesses also struggle with it. And in the business world, it is a sign of business failure and puts the bad impact of the relationship between business & suppliers. Consequently, many businesses owners often turn to loans or liquidating assets or inventory to get funds. But on the other hand, every problem have a solution, so we have a better solution for this cash crunch – Reverse Factoring.

What is Reverse Factoring?

Before talking about the advantages of Reverse Factoring, it is very necessary to know about Reverse Factoring. In this concept, there is a big role in finance or lending institution  - also known as “factor” works as a third party mediator between a company and their supplier. At here these factoring companies provide you instant cash on the behalf of your outstanding invoices by purchase bill discounting & taking charges as a percentage of the total amount and collect the outstanding payment from your customers.

The only task of reverse factoring is to speed up accounts receivables and raise cash flow for companies. It is a lucrative type of financing that has proven to the aid solves the cash flow crisis for many corporations.

Benefits of Reverse Factoring

Low-Interest Rates

This is one of the best advantages of reverse factoring in India, even as this is not exactly a loan but kind of and if you compare interest rate then you will find that lower interest rates are charged by the reverse factoring service providers.

Improved Cash Flow

As factors pay invoices to companies before time, so they no longer have to wait for the outstanding payment for the expenses. This makes possible better cash flow and better cash flow management, which are very important to the overall financial health of a company.

Reduced Early Payment Requests

With this best option, the company no longer have to deal with before time payment requests from merchants. With the existence of a factoring agreement, suppliers get their payment on time and you can maintain your business flow without any hindrance.

Reduces Disputes

As well as early payment requests, companies will also reduce payment or invoice disputes with suppliers. As a factor is concerned, invoices are already agreed upon, and your suppliers do not have to worry about default or fake invoices.

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