Invoice trading is a process in which a business borrows money from an investor using its unpaid invoices, also known as account receivables, as a collateral or guarantee of payment.
Here is a quick example:
John owes a small office supply company that offers customers flexible payment plans. John receives a purchase order valued at $30,000. His office supply company delivers the goods and gives the customer 90 days to submit a payment. Even though John made a sale for $30,000 and delivered the goods, he will not receive the full payment for 3 months. However, since John’s company is just a small local business, he needs that cash as soon as possible to buy more raw materials as well as pay other expenses.
Invoice trading is the perfect solution for John.
Using an online marketplace that puts small and medium-sized businesses in touch with trustworthy investors, John can create an auction for the invoice he wishes to trade. When the auction process is completed, John can get a cash advance of around 80% of the invoice’s value in just a few days after the purchase. Then, he can get the rest of the money, minus fees, when the customer pays for the goods once the 90 days are over.
If you are interested in invoice trading, you can use our calculator to get an estimate on how much you’d have to pay based on the value of your unpaid invoices as well as the days financed.
What are the advantages of invoice trading?
- Quick access to cash
- Cash Flow acceleration
- Easier alternative to traditional finance (banks)
- No collateral assets required
- Available to big and small businesses
Invoice trading with Velotrade
Velotrade is an online marketplace in which businesses can post their unpaid invoices for purchase. Verified investors from different backgrounds and industries participate in the auctions, thus allowing for a steady and continuous flow of financing. When an investor buys an invoice, the businesses receive funds in their bank accounts within a few days.
The process works 100% online and it goes through a very efficient verification process to ensure safety for both parties. Velotrade is regulated by the Securities and Futures Commission of Hong Kong, which maintains and promotes the transparency and orderliness of the securities and futures industry registered in Hong Kong. The platform supports different currencies and accepts businesses from all over the world, as long as they are properly verified and meet the application criteria.