What is the difference between recourse factoring and invoice sales?

A recourse factoring agreement normally involves both invoice administration and invoice financing. The company typically borrows funds secured against its accounts receivable. Usually, the loan amount makes up 80–90% of the invoice value and is recorded as debt on the balance sheet. Recourse factoring can be particularly attractive for companies with many invoices and a need for their administration.

With invoice sales (non-recourse factoring), the company sells the entire invoice to a third party (for example, a bank) and receives the full invoice amount (100%) directly. This frees up working capital without increasing the debt ratio, and the funds can be used immediately for other purposes.

What is non-recourse factoring (invoice sales)?

We primarily facilitate invoice sales without recourse. This means that a third party (the bank) takes over the credit risk related to the customers. Invoice sales with recourse means that the company still carries the credit risk when the invoices are settled.

How does invoice sales work in practice?

After an invoice sales agreement has been made, a third party (the bank) takes over the full credit risk. In practice, this means the company can send invoices as usual, in the same way as before. The difference is that the account number is changed to the bank’s account, and the bank is usually copied on the invoice when it is sent.

Once the invoice is registered in the bank’s system, the amount is transferred to the company. The invoice amount is therefore normally available the same day or the day after the invoice is sent. When the invoice is due, the customer pays directly to the bank.

Which companies are suitable for invoice sales?

Invoice sales are suitable for companies that want to improve cash flow and finance operations without taking on traditional loans. It is particularly suitable for businesses with a large gap between accounts receivable and accounts payable, and that primarily sell to other businesses (B2B).

Do the customers for invoice sales need to be Nordic?

We focus on invoice sales for Nordic companies, but the customers included in an invoice sale can be located anywhere in the world. Through our partners, customers undergo a credit check, and any necessary credit insurance is typically included in the financing terms. The company usually does not need to arrange separate credit insurance.

Nominal and effective interest rate

We provide our customers with clear agreements, including a simple summary of both nominal and effective interest rates. The nominal rate is the interest rate offered by the lender, excluding any additional costs. The effective rate, on the other hand, includes other fees and charges imposed by the lender. This makes the effective rate a more complete measure of the actual cost of the loan. It is therefore important to compare loans based on the effective rate to get an accurate picture of the total cost.

Why use Lind Finans?

With long experience in the capital market, we collaborate with several different lenders and banks, increasing the likelihood of finding a financing solution that meets your company’s needs. We provide non-binding alternatives and assist in the process on discussions regarding different solutions and loan terms.