• Oil
• Metal
• Power
• Manufacturing
• Transport
• Textiles
• Machinery
• Technology

For a business to operate efficiently, cash flow is key. Thus, many companies will discount invoices or receivables when they are sent out.

Operationally this will look and feel a lot like invoice discounting or factoring. When an invoice is sent out, the funder will factor or discount the invoice and provide a percentage of the value owed in the invoice up front to the company. By discounting a portion of this ‘receivable’, the company is able to grow.

Invoice factoring or discounting is one type of receivables finance. There are others used within structured transactions. However, when it comes to receivables factoring, invoices are essentially the discounted product.

Receivables factoring is a term used interchangeably with invoice factoring. In effect, it is when the whole ledger of invoices or debts are factored. Receivables or invoice discounting will conversely mean that individual invoices are discounted and this may be selective invoices or customers of a company; not the whole book.

• Cash flow from the business or lending
• Invoice finance
• Invoice discounting
• Export factoring
• Structured finance

Companies looking for receivables factoring are generally seen and reviewed (in terms of eligibility) on a case by case basis. Generally, a financier would ask for the following in an application:

• Audited financial statements
• Full business plans
• Financial forecasts
• Credit reports
• Details and references of the directors
• Information on assets and liabilities

Receivables factoring can reduce working capital constraints. Many companies which have small overdraft facilities or are funded through venture capital or equity investment might want to free up cash to fund the day-to-day operations of the business, and given the uncertainty around receiving payments, receivables factoring can ease cash flow constraints and ensure guaranteed payment.