Reverse factoring
Reverse factoring is a solution driven by the buyer to support its suppliers. In this case, the buyer helps the supplier receive early payment by working with a financial institution.
How it works in detail:
• Step 1
The supplier delivers goods or services to the buyer and raises an invoice.
• Step 2
The buyer approves the invoice and works with a financial institution to offer early payment to the supplier.
• Step 3
The supplier sells the approved invoice to the financial institution at a discount. This allows the supplier to receive early payment.
• Step 4
The financial institution advances the payment to the supplier.
• Step 5
The buyer pays the financial institution on the original invoice due date.
Reverse factoring helps suppliers maintain cash flow while strengthening their relationship with buyers.