Invoice financing is when an invoice is sold to a third party by a business after selling a good or providing a service. Invoice financing helps businesses operations by providing them with immediate cash flow based on their accounts receivable, allowing them to pay employees, suppliers, and reinvest in operations and growth instead of having to wait until their customers settle their invoices in full.

Invoice financing is also synonymous with accounts receivable financing, invoice factoring, invoice discounting, receivables financing, and spot factoring.

How does invoice financing work?

  1. A business (seller) sells a good or service to a customer (buyer).
  2. The business then issues an invoice and gives the buyer a window of 120 days to complete the payment.
  3. The seller cannot wait 120 days for the buyer to pay, so it decides to sell the invoice to a financing company or an investor.
  4. The financing company or investor accepts the transaction, buys the invoice, and gives the seller a cash advance equivalent to approximately 80% minus a financing fee. Invoice collection procedures can either be carried out by the businesses (seller) own credit controller or the invoice financing provider.
  5. When the buyer submits a final payment, the balance of the invoice is remitted back to the seller, minus a service fee.

How much does invoice financing cost?

Use our calculator to determine how much your business would have to pay when using Velotrade’s invoice financing platform. Here is a simplified example of how fees work:

Invoice value Days financed Today you will be advanced* At maturity of invoice you will receive the balance of
$10K 120 $7,800* $1,842
$50K 120 $39,000* $9,211
$200K 120 $156,000* $36,844
$400K 120 $312,000* $73,688
$500K 120 $390,000* $92,110

*Invoice financing 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.

 

What are the advantages to invoice financing?

  • For a fee, companies can unlock funds tied up in unpaid invoices so that they receive funds without waiting for customers to pay (usually 30-120 days).
  • It is an easier alternative to traditional finance products offered by banks since it usually requires no collateral assets or major paperwork.
  • Most financing companies also take full responsibility for the collection of payments, which saves businesses important admin time.

What are the disadvantages to invoice financing?

  • Fees

And, if you decide not to work with Velotrade:

  • Most financing companies lock businesses into long contracts, obligating them to perform all kinds of invoice financing only through them.
  • High factoring fees
  • Potential one-time and monthly hidden or “extra” fees.

Velotrade offers all of the advantages and removes the disadvantages when compared to traditional invoice financing 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.

Here’s how you can register and sell your invoices on our marketplace

Apply for financing right now!

If you are a registered company that’s been in business for 1 year generating turnover of over 1 million dollars (USD) and your client has a solid credit history and has been in business for at least 3 years generating turnover of over 20 million dollars (USD), then you can discount your invoices using Velotrade today!

We have a list of accredited investors ready to provide funding. 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.

Velotrade provides companies around the world accessible and reasonable ways to financing

 

We are an internet-based invoice financing platform that allows you to sell your outstanding invoices through our marketplace. 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. This means that all transactions are leigt, fair and secure.

Even though we are based in Hong Kong, we work with business all over the world, including Vietnam, China, and Thailand. To successfully sell an invoice via Velotrade, a business must be a duly registered company in a country acceptable for the qualifying criteria set by Velotrade and have verifiable trading history, satisfactory credit standing, and total turnover.

Find out if your business qualifies for invoice financing with Velotrade