What is Invoice Trading?
Invoice trading or invoice crowdlending is a new alternative to traditional bank products such as factoring, invoice discounting, and receivables financing. It is one type of peer-to-peer (P2P) lending, which allows businesses and individuals to purchase invoices or receivable notes at a discount and to selectively sell single unpaid invoices (accounts receivable) to a pool of private investors via an online invoice trading platform.
It is cheaper than any traditional system, owing to lower charges and fees, as well as to reduced transaction costs. Accounts receivable can be purchased from any location, by investors dispersed all over the globe. In order to help its suppliers to finance its receivables more easily - and at a lower interest rate than what would normally be offered, the ordering party may initiate a supply chain financing.
Invoice trading is a flexible and promising financial liquidity management method, which is especially useful for small and medium-sized enterprises (SMEs). It has many advantages for businesses and investors, and it may act as a source of finance for SMEs. Businesses can access finance quickly, improve their working capital and free up cash that can be further used to improve their short-term liquidity, pay expenses, or make new investments.
Investors who are seeking short-term investments are able to earn good returns on their money that are well above the average. Therefore, trading receivables is often the most suitable option for both borrowers (SMEs) and investors. Unlike some other types of peer-to-peer lending, such as P2P business lending or P2P consumer lending, where the investment is often unsecured, invoice trading has the advantage of having the invoice as a guarantee which drastically minimizes the risks.
Why To Invest In Invoices?
Investment in accounts receivable leads to better control over cash and working capital for both borrowers (SMEs) and investors which is the reason that investments in this area are currently gaining great significance. Not to mention that a shift to long-duration issuance in the corporate bond market has limited the supply of high quality, short-term investment products, which resulted in short-term money investors starting increasingly to consider confirmed receivable purchases as a form of trade finance that offers high quality, non-financial corporate credit risk in a short-term, floating-rate product.
When it comes to investing in invoices, investors obtain new short-term investment instruments with low risk and good returns. It also gives investors another way to diversify risk across their investment portfolio.
The Benefits of Invoice Trading:
- Improved cash-flow
- Fast working capital injection
- Business growth
- Supply chain financing
- Better flexibility
- No collateral asset
Are you looking for a partner that can provide this kind of digital Trading platform for your target market? Please get in touch with ZWEBB by filling out the form below.