Reverse Factoring (Supplier Finance)
Reverse factoring, also called supplier finance or confirming, is a buyer-led financing arrangement in which a funder pays a buyer’s approved invoices to its suppliers early at a small discount, and the buyer repays the funder at the invoice maturity date. Because it is initiated by the buyer using its stronger credit, suppliers get cheaper, faster financing than they could obtain on their own.
How it works
The buyer approves a supplier invoice, a funder pays the supplier early less a discount, and at maturity the buyer pays the full amount to the funder. The discount is priced off the buyer’s credit, which is what makes it cheaper for suppliers than financing their own receivables.
Reverse factoring vs traditional factoring
Traditional invoice factoring is supplier-led and priced on the supplier and its customers. Reverse factoring is buyer-led: the buyer approves the invoices and anchors the credit, so the same supplier usually gets a lower rate. The data flows from the buyer’s approved payables and settles through consolidated buyer payments.
Operations
A program depends on onboarding many suppliers, ingesting approved payables, funding inside a short window, and reconciling the buyer’s settlement at maturity. Zolvo automates that layer, see supply chain finance and payment matching and reconciliation.