Characteristics of Single Invoice Factoring

Single invoice factoring (SIF) has been a favorite method utilized by companies who need to improve their working capital and raise immediate financial resources to fund operations and other corporate endeavors.

By definition it is an agreement by which a company sells the right to collect against a particular sales invoice, which in accounting refers to a trade receivable, in exchange for a monetary sum. This frees the locked up cash within the invoice making it readily available for use. To get to know more about single invoice factoring, take a look at its following characteristics.

1.    Onetime Transaction – From the name itself, we can deduce that this method of invoice factoring is selective in nature. It only caters and makes use of one receivable which has been specifically chosen by the company itself. The same also has all the liberty to choose when to do it and how often. Because of this, SIF is free of any long term contracts.
2.    Debt Free – This arrangement does not result to a debt because it is not a loan. It is an asset transaction. How so? Selling the right against a receivable’s collection is just like selling any other asset. Therefore, the transaction creates zero debt and comes without the strings attached to one. Its effect in the financial statements would be a decrease in trade receivables coupled with an increase in cash and expense that is related to the fee.
3.    Quick and Immediate – Unlike other financing mediums, single invoice factoring is pretty quick. Some providers are able to approve and release cash in as fast as twenty four hours. This is because the processes and requirements needed are lesser saving a lot of time and effort on everyone’s part.
4.    No Frills – As mentioned, there is less requirements needed to be submitted and the procedures to be undertaken are shorter and lesser. This is highly attributed to the fact that SIF providers bank on the customer’s creditworthiness and not directly on that of the company’s as would banks and other financial firms would.
5.    Burden Offloading – Apart from selling the rights against collection, single invoice factoring also transfers the burden of it from the company to the provider. In other words, the provider or the chosen factor shall take care of collecting from the owing customer to whom the invoice is attributed to. This saves the business from that which will obviously take time, effort and money.

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