You may already be familiar with concepts such as "debt factoring" or "invoice financing" - but that doesn't matter. We do it differently here.
"Debt factoring" is the sale of invoices (representing a debt between a supplier and its customer) at a discount to face value. The buyer of the invoice can secure a return if and when the customer pays up, and the seller of the invoice secures much-needed cash flow to pay rent, salaries and so on.
So far, so good. What's the downside for sellers? Actually, there are a number of downsides:
- Large debt factors have significant market power, and can force unfavourable terms (for example, large discounts) on sellers
- Debt factors typically demand some form of collateral, against which they have recourse should an invoice customer not pay in full
- Debt factors will normally require exclusive access to all of the seller's accounts receivable
The fluidp2p platform allows businesses to sell or auction their invoices on a peer to peer basis. No abusive factors, no collateral, no exclusive access. Flexibility to sellers, and a good deal for investors too.
Frequently Asked Questions
We have tried to address the most likely questions you will have. If you have any questions not covered here, please don't hesitate to contact us at firstname.lastname@example.org.
Q. As a supplier, how to I upload invoices?
A. It couldn't be easier. Just like with most auction websites, select the "Sell" option on the homepage. This will prompt you to enter the details necessary to upload an invoice for investors to bid on.
Q. How long do the auctions last?
A. As long as the supplier wants. As with any auction site, when the invoice is initially uploaded, the supplier sets the length of the auction. It could be an hour; it could be a month. The supplier will want to keep in mind that the closer an invoice comes to its due date (or, if unpaid, the more time elapsing after its due date), its value may change in the minds of investors. For example, if an investor knows that an invoice is due to be paid in three days, she may be willing to pay more for it than if it were due to be paid in thirty days. Similarly, if an invoice is two days overdue for payment, an investor may be willing to pay more for it than if it if were twenty days overdue.
Q. What actually happens when an invoice is purchased?
A. Whether purchased outright or with a winning bid, ownership of the invoice (and underlying rights to income) pass to the buyer. The good or service which the invoice concerns does not pass to the buyer, and nor does it represent collateral if the invoice customer does not pay, pays late, or underpays.
Q. Is the invoice customer notified when an invoice is sold or auctioned?
A. As part of our fraud-prevention measures, we request the seller's permission to contact the invoice customer in order to verify whether the invoice the seller has placed on the FluidP2P platform is valid. If that permission is not granted, we will not contact the invoice customer.
Q. What if, while the account receivable is being auctioned, the customer pays the supplier?
A. An invoice is put up for sale on FluidP2P by the supplier, but then the customer unexpectedly settles the invoice early, before it can be sold, and there is no longer an amount due to the supplier. When this happens, the supplier is required to end the auction immediately. If an invoice is sold via FluidP2P even after the customer has paid, the supplier is nonetheless contractually obliged to sell the account receivable to the investor for the agreed amount.
Q. What if the customer never pays, or underpays?
A. Any investment is risky. The key risk with invoice financing is that the customer does not pay, pays late, or underpays. This is often called "credit risk". This may occur for many reasons (cash-flow issues, a dispute over the invoice amount, etc.). FluidP2P will automatically chase debts on your behalf, and can arrange for the invoice to be sold to a non-recourse debt factoring firm. This may be a useful way of minimising a loss or securing a return.
Q. As a supplier, can I set a minimum reserve price for an invoice?
A. Yes, just as with most auction websites, it is possible to set a minimum reserve price - the lowest you will be willing to sell the invoice for. This is kept secret from bidders. If bidding fails to reach the minimum reserve price by the time the auction finishes, the invoice can be withdrawn (i.e. not sold), or sold for the highest offer.