Reverse factoring (also a form of Supply Chain FINANCE) is when a finance company, such as a bank, PLACES itself between a company and its suppliers, and commits to pay the company’s invoices to the suppliers at an accelerated rate.

Reverse factoring allows suppliers to receive discounted payments of invoices which are due to be paid by a buyer (i.e. an account payable (AP)). Once the buyer has approved the INVOICE for payment, the finance is raised separately against the AP by the supplier from a finance provider (USUALLY a bank or factoring company), who relies on the creditworthiness of the buyer. The buyer will pay the finance provider at the AGREED invoice due date, and the supplier receives a much prompter discounted payment from the Factor.

Reverse factoring (also a form of Supply Chain Finance) is when a finance company, such as a bank, places itself between a company and its suppliers, and commits to pay the company’s invoices to the suppliers at an accelerated rate.

Reverse factoring allows suppliers to receive discounted payments of invoices which are due to be paid by a buyer (i.e. an account payable (AP)). Once the buyer has approved the invoice for payment, the finance is raised separately against the AP by the supplier from a finance provider (usually a bank or factoring company), who relies on the creditworthiness of the buyer. The buyer will pay the finance provider at the agreed invoice due date, and the supplier receives a much prompter discounted payment from the Factor.