Reserve Release
Reserve release is the payment a factor makes to its client after a financed invoice is collected, returning the held-back reserve net of fees. The reserve is the portion of the invoice the factor did not advance up front, and it is released once the debtor pays and any chargebacks or disputes are resolved.
What Reserve Release Is
When a factor funds an invoice, it advances part of the face value and holds the rest as a reserve. After the account debtor pays, the factor returns that reserve to the client, less its fees and any deductions. That return is the reserve release, and it is the second and final piece of cash the client receives on an invoice, after the initial advance.
How the Math Works
On a $100,000 invoice factored at an 85 percent advance rate, the client receives $85,000 up front and the $15,000 reserve is held. When the debtor pays in full and the factor takes, say, a $2,000 fee, the reserve release is $13,000. If the debtor short-pays or a dispute reduces collection, the release shrinks accordingly, which is how dilution flows through to the client.
Timing and Triggers
Reserve release is triggered by collection, not by the invoice date, so the client's final cash depends on when and how fully the debtor pays. Factors release reserves on a schedule, often as invoices clear or in periodic batches, and may hold a reserve longer if there is a chargeback risk or an open dispute. Accurate, timely reconciliation is what lets a factor release reserves promptly, which clients value.
Why It Matters
Reserve release is where reconciliation meets client cash flow. A factor that reconciles collections slowly releases reserves slowly, which strains the client relationship; one that reconciles accurately and quickly can release promptly and correctly. Zolvo automates the reconciliation that determines reserve releases, so they are accurate and timely rather than a manual month-end exercise.
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