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Exploiting unsecured invoice acquisitions for financial gain

Unsecured invoice purchases: an exploration of their workings and why they're advantageous for merchants with effective risk management strategies.

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3 min read
Purchasing invoices without proper security nets your profits
Purchasing invoices without proper security nets your profits

Exploiting unsecured invoice acquisitions for financial gain

For retailers seeking to manage their cash flow effectively without putting their assets at risk, unsecured invoice purchasing, also known as invoice factoring, presents an attractive solution. This financial tool offers several advantages that can help retailers capitalize on time-sensitive opportunities and strengthen their business operations.

One of the key benefits of unsecured invoice purchasing is that it does not require retailers to pledge any physical or business assets. This means that even if customers default on payments, retailers' property remains protected from seizure [1][5].

Another advantage is faster access to cash. Since no asset appraisal is required, approval and funding are usually quicker, enabling retailers to manage their cash flow more efficiently and take advantage of opportunities like inventory restocking or new contracts [1][2][3][5].

Confidentiality is another advantage, as invoice discounting, a related method, allows retailers to keep financing arrangements private, with customers unaware of the third-party involvement [3].

Improved cash flow and flexibility are also benefits of unsecured invoice purchasing. Retailers can extend more favorable credit terms to customers without risking their own liquidity, supporting stronger client relationships and potentially increasing sales [5].

Moreover, many factoring companies provide credit checks on customers, helping retailers avoid high-risk clients and reducing default exposure [5].

To minimize the risk of payment defaults, retailers can partner with reputable factoring companies that perform thorough credit checks on both existing and potential customers [5]. They can also monitor customer payment behaviours regularly and adjust credit terms accordingly to avoid overexposure.

Diversifying the customer base is another strategy to spread risk, rather than relying heavily on a few large clients. Negotiating clear contracts with customers defining payment expectations and consequences for late payments, establishing a firm legal framework, is also crucial [5].

Retailers can also consider factoring arrangements that include recourse or non-recourse options, depending on their risk tolerance. Non-recourse factoring can transfer default risk to the factor but often at higher cost [5].

Maintaining good financial records and demonstrating strong business creditworthiness can also help retailers access better factoring terms and more flexible financing [1][2].

In summary, unsecured invoice purchasing is advantageous for retailers seeking quick liquidity without risking assets, while risk management primarily involves selecting credible customers and working with factoring partners that provide credit vetting and support.

Two companies specializing in this field are Lynck Solution GmbH, which focuses on digital payment processing for e-commerce and point-of-sale transactions, and Creditreform, Germany's leading provider of economic information, marketing data, and solutions for receivables management [6][7].

CrefoPay by lynck, developed in collaboration with Creditreform, enables seamless online payment processing and risk management [8]. Creditreform has over 127 independent business locations and more than 3,200 employees in Germany, and across Europe, it has almost 4,000 employees, 162 business locations, and serves over 162,000 member companies [9].

Invoice purchasing can lead to a higher conversion rate as it can reduce checkout abandonment, and more than 40% of German e-commerce customers prefer to pay on invoice [10]. Unsecured invoice purchasing allows companies to offer invoice payment without significant additional financial burdens and with full cost control [11]. Furthermore, it can result in cost savings as there are no fees for insurance or external providers [11].

For more information about Creditreform, visit www.creditreform.de, and for more information about Lynck Solution GmbH, visit www.lynck.de.

References:

  1. Invoice Factoring: A Solution for Small Businesses
  2. The Benefits of Invoice Factoring for Small Businesses
  3. Invoice Factoring vs. Invoice Discounting: What's the Difference?
  4. 5 Ways to Minimize the Risk of Payment Defaults
  5. How to Choose the Right Factoring Company for Your Business
  6. Lynck Solution GmbH
  7. Creditreform
  8. CrefoPay by lynck
  9. Creditreform: Facts and Figures
  10. The Preference for Paying on Invoice in Germany
  11. Cost Savings with Invoice Factoring

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