Reverse factoring

Unlike factoring, which involves the sale of receivables to third parties, reverse factoring is less well known. Yet as a financing instrument it seems to be an ideal way to ensure short-term liquidity, particularly during the current corona crisis.

In reverse factoring, a factor - oftentimes a bank - finances a supplier's receivables at the request of the buyer company. To what advantage? The buyer can extend the payment periods vis-à-vis the factor as intermediary and, in this way, seemingly create liquidity.

This creates a conflict, though: financial debt is taken on without it needing to be classified as such.

Read the entire commentary in Börsen-Zeitung here (in German only):

Reverse Factoring - A Crisis Accelerator?, published on 7 July 2020 in Börsen-Zeitung