Supplier Financing
Factoring
Provides cash based upon 100% of invoice value.
Provides less cash for each invoice since cash received is based upon on average 70% to 80% of receivables balance.
Cash received early is not considered debt to the supplier. This frees up supplier's credit limits for other uses if needed. Non-Recourse to suppliers.
Cash received is considered debt on supplier's financial statements and the factoring program typically needs to be disclosed. The debt and disclosure impact credit ratings and consume credit capacity.
Discount/Interest costs could be lower than what supplier could otherwise obtain since the credit risk from supplier financing leverage "Buyers" credit rating.
Interest cost is based upon supplier's credit rating.
More flexibility in receiving cash since cash can be received on a daily basis based upon invoice approval.
Less flexibility with program as cash received is typically on a monthly basis.
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