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.

Qualities of the Export Funding Company that You Should Hire

international tradeInternational trade is no walk in the park. It’s riddled with quite a significant amount of risks coupled with a stash of work, work and work but when done right it can rip off rewards like no other too. This is essentially why many entrepreneurs go out and venture exportation. One of the critical tools in such venture is what we call export funding and given its crucial role, it would only be common sense to choose the best provider to tap.

But what exactly makes a great export funding company? What qualities should you seek? Here is a list to jumpstart your search.

EXPERIENCED – The more seasoned the company is then the better. This means that they have already handled quite an amount of work and experience to earn certain skills and knowledge that no other teacher or book could provide. This shall also make things run smoother as they already have familiarity and procedures in place which have been tried and tested.

KNOWLEDGEABLE – There’s more to exportation than meets the eye and companies will need all the expertise they can get regarding it. Companies with highly knowledgeable team are not an option but a requirement.

UP TO DATE – With so many changes when it comes to foreign legislation, currency exchange rates, tariffs, duties and taxes and more, finding a company who is able to keep themselves up to date is of huge importance. No entrepreneur would want to commit slipups just because their provider missed a particular detail.

PROFESSIONAL – One of the tasks that these companies would have to take over is payment collection. This therefore necessitates that they not only act professionally when collecting from the customers but they too must be able to adapt to the territory’s culture and language when doing so. After all, countries around the world have uniqueness to them that must be approached suitably.

ETHICAL – With country specific and international legislation, confidential information, legal documents and similar other matters, only choose export funding companies who have showcased and proven an ethical track record. No entrepreneur would want to transact with someone who’s sketchy.

TIMELY – There’s no time to dilly-dally and procrastinate. The reasons for an export funding almost always involve the variable of time. Because companies would not want to stain liquidity due to the length of time before foreign transactions are completed and paid, the said method is called for. Therefore, a provider who can deliver on time is indispensable.

The Types of Single Invoice Finance

invoice-financeSingle Invoice Finance is a method that enables companies to draw cash from its receivables before payment is due or received from its customers. There are many types to it and today we shall discuss what they are all about and how they differ or come alike.


  • Factoring

In this type of transaction, the cash advance received is in exchange for the right to collect against the invoice. Here, the burdens of collection alongside the tasks that come with it are passed on to the provider. The fee shall then be deducted from the total amount or value to be received.

  • Discounting

Discounting differs in a way as the invoice is used as a security. The company receives the advance but retains the collection function. Upon its completion, the company shall repay the provider of the amount advanced plus the fee.


  • With Recourse

In the event that the owing customer defaults, the company is under responsibility to repay the provider with whatever amount it has previously advanced plus the fees. The loss of a defaulting invoice is borne by the company.

  • Non-Recourse

Should a customer default in payment, the risks and losses shall be completely borne by the provider. Compared to a ‘with recourse’ arrangement, this has a higher fee to compensate for the risks absorbed by the provider.


  • Domestic

The invoice used in this scenario pertains to a customer whose company or residence is within the same territory or country as the company.

  • Export

In stark contrast to the former, export single invoice finance caters to business entities that wish to bring their trade overseas. The receivable is due from a client or a customer from a country abroad, in other words an importer.


  • Confidential

In a confidential arrangement, the use of single invoice finance is not disclosed to the customer. They won’t have the slightest idea that the invoice due from them is either factored or discounted. This is often used by entities to avoid confusion in terms of payment collection.

  • Disclosed

As for disclosed single invoice finance which is the complete opposite of the former, customers are made aware of the transaction for purposes of full transparency. But the option to disclose or not is simply a matter of preference and not a necessity.


Misconceptions on Export Finance

export-financingMany domestic and local companies find the international market promising which it really is; however, it is at the same time pretty intimidating with all the scrupulous documentation, country specific legislations, international laws, liquidity drawbacks collection hitches and financial risks that come with it. Exportation when done right however can bring about exceptional growth and endless opportunities. One way for entrepreneurs to achieve all of it while dodging the aforementioned drawbacks is through the help of export finance.

The export finance sector is one of the most in demand financing providers when it comes to foreign trade. It aids companies in the documentation, collection and liquidity issues that it would otherwise face had it ventured on its own.

But just like any other financing alternative out there, it comes with its misconceptions. Many business owners do not fully understand how it works or what benefits it provide thus disabling them of its advantages. To prevent that from happening, we have come up with a lies versus truth list to iron out the facts.

Lie: It’s only for big companies.

Truth: Export finance was designed to aid small and middle scale enterprises, startups and even businesses in recovery for their foreign trading endeavors so saying that it’s only for established organizations is one huge fiction. It’s available for all companies regardless of size and industry.

Lie: It is expensive.

Truth: On the contrary, it saves up on costs. With the aversion from credit, interest rate, currency and similar other risks, it actually helps reduce the losses that a company might face. Furthermore, it provides for a team that caters to the entire collection function thereby freeing the company of having to further invest on an extended arm in each country it seeks to export to which obviously requires a huge amount of additional capital.

Lie: It hurts creditworthiness.

Truth: Many have confused export finance with a loan. It is not a debt or anything near it. In a way, the aforementioned service is closely akin to a receivables financing medium but instead of a domestic transaction, it tackles an international perspective. Exporters get to advance the payment that would otherwise be received at a much later date from the importer who often opts to send in pay only upon receipt of goods or after they have been resold. This not only releases locked up cash within the sales invoice allowing it to be reinvested and used for operations, further strengthening working capital and liquidity. 

The Biggest Misconceptions About Spot Factoring

spot-factoringSpot factoring is the method of deriving finance out of a particular customer invoice. It is achieved by selling the right to collect against it to a provider called the factor who in turn grants a monetary sum of its value, often ranging from eighty to ninety five percent with the remaining balance to be given upon full collection from owing customer less fees. It is otherwise known as single invoice finance.

With its many perks and benefits, more and more companies have come to use it. Unfortunately, many misconceptions still hound spot factoring making others adamant about not using it despite of the proofs to its advantages. To help clear things through, we’ve listed down the said misconceptions and the truths behind them. Better read up to rid yourself of false information.

Misconception: It is a form of debt.

Truth: On the contrary, it is nowhere near it. Factoring is first and foremost the sale of a company’s asset and in this case, its receivables. This makes it a far different transaction from a loan. When one goes into this financing method, the transaction is recorded as a decrease in trade receivables and an increase in cash. The liabilities section is left completely untouched.

Misconception: The Company is tied to a contract.

Truth: With spot factoring, the company gets to choose when and how often to do it as well as which particular invoice to use. It provides for great flexibility and is a onetime transaction only. Bulk factoring however will be held out for a specified period of time and this is the one that involves a contract and all of the entity’s receivables.

Misconception: It is very expensive and greatly diminishes receivable value.

Truth: The fees involved are pretty minimal and this will be taken out of the remaining balance withheld by the provider up until full customer payment collection. Plus, such amount is discussed and agreed upon by both parties on the onset. Considering the time savings and collection burden removal, the fees are pretty cheap.

Misconception: The method is only for financially struggling companies.

Truth: Spot factoring is for everyone, solvent or insolvent, financially capable and financially troubled. This is because this financing medium banks on the creditworthiness of the customer to which the invoice is attached to instead of the company selling the rights against its collection. It is very much unlike bank loans and similar providers that have very strict credit requirements and meticulous application methods.



Small Medium Enterprises and Export Overdraft

What exactly is an export overdraft?” you might ask. To start these enable businesses to bring their trade abroad without having to suffer the complexities in documentation and the accompanying risks.

export overdraftOf all, SMEs or the small and medium scale enterprises benefit a lot from this as they are those who often find global expansion promising but too risky for their current operations. They fear that a small blow will cause massive devastation to their businesses which should not be the case given the right planning, preparation and use of the correct resources and talents.

Export overdraft is competitively and affordably priced at a fixed fee and does not have hidden costs and long term commitments that can tie you up to cost inducing liabilities and contracts. The secret is to finding the right facilities to guide and assist you in this. In fact, such is designed so as to allow SMEs to go out into the global and export market to give them better market reach and ultimately profits and growth. Also, it can support starting companies who although still unable to bring their goods and products to the export market at the present do find it hard to operate due to late payments from customers as well as restrictive loan agreements.

Now, to benefit better from this it is important that businesses see to it that they work with the best export overdraft service provider. How do you do that and what should you look for in one? Here are things to consider.

1. Find a firm that can level your industry. It is always better to work with a service provider that caters and is an expert in the industry that your business is in. This allows them to perform a better and more direct approach to cater to your needs.

2. Look not just on costs but on quality as well. It may be easy to sway to one who offers the least costs but remember that you should dwell more on the quality of service and how well they will address your needs.

3. Try asking around. In the corporate world, word of mouth is one strong and effective way to find the best products and services. Ask around from colleagues and other reputable sources. From the list that you gather from your inquiries, don’t forget to do your research as well.

4. Read up from the internet. With just a few clicks, it can be easy to spot an export overdraft facility that can help you with your endeavors.

Single Invoice Discounting Benefits and Disadvantages

Single invoice discounting is another common type of financing and funding means that companies take into consideration whenever they are looking for other sources of cash. We all know that one common source of such are the company’s own sales unfortunately not everyone pays in hard cash. Others purchase from you on credit therefore your financial resources can be locked up in your receivables and their invoices. To free them up, discounting can be used.

Like most things, it has its own set of benefits and disadvantages. Let’s start with the cons below:

  • single invoice discountingYou may be asked to buy the invoice back if your customer doesn’t pay for it. This is the case for a with recourse invoice factor as you retain all risks of nonpayment. To do away with this, go with a non recourse service where risks are shifted from you to them. This however can cost you more than the former.
  • Getting the wrong people can irritate your clients. There are highly unprofessional firms who will irritate the hell out of your clients to ascertain that they do pay on the given date. This is what happens if you fail to research and hire the wrong factors.
  • You do not get the whole value of your receivable in full. Although this is quite expected as factoring will always involve a fee. It will however not decrease it to a large extent. In fact you can get up to ninety five (95%) of the amount in advance but if you are one who does not prefer this then invoice factoring is definitely not for you.

Now, we proceed with the advantages:

  • It is fairly quick and easy and will require less hassle when compared to applying for a bank loan. In fact, the funds can be available in as early as twenty four hours. That will surely provide for emergency situations.
  • The fees or expenses associated with it are also considerably lesser as it will only be regarding the invoice you subjected to your chosen factor.
  • It can hasten up the life of your receivables therefore you wouldn’t have to wait for days, weeks or months before you get hold of the cash.
  • Again as stated earlier, a non recourse type will remove any likelihood of doubtful account expense loss.
  • Although technically a loan, it does not provide the same effects. Single invoice discounting involves using your receivable as collateral for the funds you advance. However, you are not going to pay for it but your customers who owed you will do. It also does not affect the liabilities portion of your financial statements.

Invoice Factoring and Keeping Facts Straight

There have been a lot of misconceptions regarding inverse factoring and we should keep facts straight so that business won’t get tied up and loose the chance to derive its benefits.

invoice factoring business growthTo refresh your ideas a little bit, here is a brief list of benefits and advantages of having invoice factoring as a means to raise funds and capital.

  1. It’s easy and simple without any overburden regarding requirements for application.
  2. It hastens very long receivables providing better cash flows.
  3. Funds can be available in as fast as twenty four hours making it a good solution for emergency expenditures.
  4. Reduction in bad debts expense and avoidance of doubtful accounts happen since the risks of non-payment are shouldered by the factor in a non-recourse type.
  5. Invoice factoring prevents the increase in liabilities since it does not involve any kind of interest whatsoever.

With that established, let us take a look at the common misconceptions for us to break the walls of misinformation.

  1. It is expensive. It isn’t. In fact, it can save your company’s financial resources. Take spot or single factoring for example. The only fees you’d have to pay for are for that specific invoice. It’s a onetime deal and it won’t involve compounding interests.
  2. It greatly decreases the value of your receivables. This is definitely untrue. Actually, some financial factoring institutions can advance up to 95% of the value of your invoice.
  3. It is only for financially distressed businesses and those who are suffering from constant losses. Do know that although many financially distressed businesses make use of it, there too are a lot of large and established companies who use it for its benefits.
  4. It can upset your customers. Not necessarily. If you do your homework well and deal with the best service providers or even get a confidential arrangement then there is no reason for your clients to feel uneasy. In a confidential arrangement, your customers will not even know that you have subjected an invoice to factoring.
  5. It requires you to have exceptional receivables management. Although having one is always preferable you do not have to worry if you are in fact having trouble with it. There are invoice factoring firms or institutions that offer additional services like receivables management, customer credit screening and the like.

Now that we’ve cleared things up, it’s now time for you to take advantage of the benefits of single invoice factoring here.


The Different Uses and Purposes for Spot Factoring

Unlike the traditional type, spot factoring involves only the specifically chosen invoice. In this type of financing service, the company has the liberty to choose which and when the invoice will be subject to a factor. Furthermore, it can also be classified to be with recourse or non recourse. The former puts the risk of non-collection from customers to you thereby you have to buy back any unpaid invoice. The latter on the other hand leaves you risk free as such burden is shifted to the factor. Regardless of that, spot factoring is used for the following purposes:

spot factoringEMERGENCY FUNDING: This is by far the most common reason why companies opt to use spot factoring as a funding method. There are certain instances, mostly unexpected, where there are expenditures that need financial resources but such is unavailable. Because spot factoring is quick, simple with minimal requirements for application, it is deemed but the perfect choice.

IMPROVEMENT OF WORKING CAPITAL: It basically improves working capital as it increases cash. It hastens the receivables and frees up any locked up cash in them making it available for use in projects or to pay for the usual expenses.

REDUCTION OF BAD DEBTS EXPENSE: This one is specifically related to a non recourse spot factoring arrangement. Since the risks that customers will not pay what is due them is transferred to the factor, you actually get to avoid them in all sense.

TO BETTER CASH FLOWS: Another purpose is to better to company’s current cash flows. This is quite obvious with the addition of cash and reduction of receivables in the financial statements.

AVOIDANCE OF DEBT: Because it is in no way a type of or even similar to a loan, there are no debts involved. Furthermore, interest expenses are not necessary. No compounding is bound to happen too. The fee to be paid to the factor will be a onetime expense. Such will be a percentage of the invoice’s value to be deducted to the remaining balance given to you upon the complete collection from your owing customer.

IMPROVE THE BALANCE SHEET: The statement of financial performance otherwise and more popularly known as the balance sheet is another thing that benefits from spot factoring. As stated earlier, it involves the conversion of receivables to cash thus not involving debt or liabilities. Only the assets portion has movement in it.

Adjectives That Should Describe Your Single Invoice Finance Provider

Single invoice factoring is nothing alien to most business people. Although relatively new compared to other modes of financing, it has already gained popularity due to its certain features. To name a few, here is a list below:

  1. Ease, simplicity and speed of acquiring the needed funds.
  2. Prevention of losses from possible doubtful accounts.
  3. Early collection of long receisingle invoice financevables whose values or amounts are to be used for certain expenditures.
  4. Absence of debt and interest expense.

Now, what should you look for in a single invoice finance provider? Here are five adjectives to guide you on your search:

  • Quick and Adept

One defining feature of factoring is its ability to derive funds against the value of the invoices in so little time and in some instances, even up to or less than twenty four hours. This makes it important for you to check on their adeptness and speed of delivering the value advanced for your invoices.

  • Knowledgeable

Of course, they should definitely know what they are doing. They must possess a certain degree of knowledge and skills regarding corporate finance and other transactions related to the job.

  • Organized and Detail Oriented

Dealing with invoices, it is a must that they possess a great deal of skill regarding receivables management. They should be able to help you screen out and clean the list of customers you give credit to. They should help you organize your receivables as necessary. There are arrangements where such is inclusive of the services they render while in some this is considered as an add on service.

  • Communicable and Courteous

Remember that they will not only work with you, your company and your team. They too will have to be in contact with your customer and clients. In the first place, they will be dealing with the collection of payments as they have bought the invoices from you. You wouldn’t want to upset your clients by grumpy and un-courteous factors, right?

  • Professional

Lastly, you need to assure thou they are full blown professionals. You want people with good ethics. You will need to get people who stick to the contract and agreement. Also, professionalism should carry with it all characteristics needed in corporate working individuals such as honesty, integrity, diligence, initiative and the list goes on.

All these should be the basic requirements and characteristics that you should look for in your single invoice finance provider.