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Reverse-Factoring

Long payment terms without liquidity gaps

Suppliers are increasingly faced with the challenge of meeting their customers’ desire for longer terms of payment. This inevitably leads to a liquidity gap for the suppliers, which classic, short-term financing can only close to a limited extent. Investments are then no longer possible, meaning that opportunities for growth are often missed.

Reverse-Factoring is BNP Paribas Factor's answer to that challenge.

YOUR ADVANTAGES AT A GLANCE

Suppliers:

  • Immediate liquidity and turnover-congruent financing of up to 100% of receivables
  • 100% risk coverage against default on receivables
  • Improved equity ratio through the sale of receivables as a result of possible reduction of balance sheet → higher rating (Basel II)

Customers (cooperation partner):

  • Strategic supplier relationship
  • Additional liquidity by taking advantage of long payment terms
  • Product and material availability
  • Transparency of payment flows
  • Optimization of working capital
  • Establishment of competitive advantages
Directly to products                              

WIN-WIN SITUATION

In this context, "reverse" stands for the transfer of the factoring idea to the purchasing side of the company and to supplier relations. Reverse-Factoring is based on a contract between the large customer, the suppliers and BNP Paribas Factor. The suppliers continue invoicing the large customer, who confirms the correctness of the respective invoices to the factor. In that case 100% of the invoice amount is immediately transferred from the factor to the suppliers. The large customer then pays directly to the factor on expiry of the credit period (up to 180 days).

Reverse-Factoring provides advantages on all sides of the supplier-customer relationship. It is basically a win-win situation:

The large customer can make use of longer payment terms, but the suppliers still have an immediate inflow of liquidity. Discounts can be drawn on both sides. Reverse-Factoring results in a stabilization of relations with suppliers, ensures supply and thus protects against production downtimes.

The good credit rating of the large customer has a positive impact on the entire financing solution – the suppliers receive financing terms which would not be possible without Reverse-Factoring.

Three-party contract between factor, supplier and large customer (irrevocable confirmation of receivables)

  • Sufficient credit limit of large customer required
  • Three-party contract between factor, supplier and large customer (irrevocable confirmation of receivables)
  • Sufficient credit limit of large customer required
  • Good rating (good credit worthiness and profitability) of the large customer
  • Full-Service or Inhouse-Factoring possible
  • Risk coverage (100%)
  • Financing (up to 100% of receivables)

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