Invoice factoring is a financing process in which a business sells its unpaid invoices to a third party company, called a factoring company. When an invoice is sold, the third party company pays the business a percentage of the total amount originally charged to the client and usually takes full responsibility for collecting the payment from the buyer. This transaction allows businesses to get quick access to cash before the clients pay for the goods or services received, allowing them to re-invest that cash right away.
How does Invoice Factoring work?
Generally, invoice factoring companies make two payments. The first one is made immediately when the invoice is sold and the second one is made when the client pays off the invoice. The basic steps are as follows:
- The business that wishes to sell an invoice submits details of their account receivables to the factoring company to determine its eligibility.
- When an agreement is reached, the factoring company makes the first payment to the business.
- The factoring company collects payment from the client.
- When the client pays off the invoice, the factoring company makes the second payment to the business, which corresponds to the rest of the total amount originally billed to the client minus a factoring fee.
How much does invoice factoring cost?
Invoice factoring fees depend on several factors such as the invoice value, the days financed, the creditworthiness of the debtor, and the length of the commercial relationship.
Use our calculator to get an idea of how much money you would have to pay if you sell your invoices to Velotrade.
What are the advantages to invoice factoring?
- Cash advance: there is no need to wait for the buyers to pay off the invoice.
- Cash flow management made easier: by getting cash immediately after a purchase is made, businesses can re-invest that money and optimize their operations.
- Outsourcing payment collection: factoring companies usually take full responsibility for collecting the payments.
What are the disadvantages to invoice factoring?
- Factoring fees
- Extra fees
Plus, if you choose not to use Velotrade:
- Extra, hidden fees
- Long, complicated contracts
- “Concentration limits”
- Low/No credit control
Velotrade offers all of the advantages and removes the disadvantages when compared to traditional factoring companies. For one, Velotrade’s clients are not locked into a long contract. Second, Velotrade offers flexibility that allows clients to fund only the invoices they want. Third, fees are transparent and straightforward.
Why use Velotrade, versus other factoring companies
Velotrade is the web-based invoice finance solution to provide you with immediate cash flow by selling your outstanding invoices. We provide small and mid-sized companies accessible and reasonable ways to financing. Our partners, including Euler Hermes, GBG, Experian, and Dow Jones Risk and Compliance, help us bring together businesses willing to sell their trade receivables to investors willing to advance funds.
Velotrade is regulated by the Securities and Futures Commission of Hong Kong, which maintains and promotes the fairness, efficiency, competitiveness, transparency, and orderliness of the securities and futures industry in Hong Kong.
While based in Hong Kong, Velotrade works with businesses all over the world as long as they are a properly registered company in any of the countries acceptable for the qualifying criteria set by Velotrade. Some of these criteria are verifiable trading history, satisfactory credit standing, and total turnover.
Get started with invoice factoring for your business today
If you are a registered company that has been in business for 12 months generating turnover of over $1,000,000 (USD) and your buyer has a stable credit history and has been in business for at least 3 years generating turnover of over $20,000,000 (USD), then you can apply for invoice factoring with Velotrade today!
If you want to help your business expand, register with Velotrade. We have a list of accredited investors ready to provide funding, so start the process now and get your SME on the right track. If you have any queries, you can contact our team online, or give us a call on +852 5808 3777.
Are you an investor?
With Velotrade, you can invest in high-yielding assets insured against default risk, without long-term capital commitment while also supporting the economy. Learn more about our innovative online invoice trading platform for investors here.