What is Bill Purchase?

Wait, did you hear it right? There is something called bill purchase? Yes, there is something called bill purchase and it is also known as invoice factoring. In bill purchase, a business sells its in-arrear bills to a financial institution. This is called the factor; this provides advance cash at a discounted price against such an invoice value.

There are a few defining qualities and basic processes followed by bill purchase. The basic properties are as follows:

In a bill purchase, the invoice is generated on credit against the sale of goods and services.Here, the business will be selling their bills to the factor

All the invoices are analyzed by this financial institution. This institution then provides a percentage of the value as the advance cash, it usually is about 80% of the cash value. This lender then goes ahead and initiates the payment collection process.

The payment will soon get cleared. When the business/borrowers clear the payment, the factor will then forward the remaining 20% of the invoice value. Of course, the amount cleared will be the amount after eliminating the interest rate or service fee.

The best part about bill purchasing is that it provides access to instant financing without any collateral. This way, the businesses can easily streamline their cash flow. They can also be extremely efficient with it, especially if the credit terms end up varying across clients. Bill purchase also never restricts the finances of any company.

Now that you know what bill purchase is, are you ready to invest? If you are ready to invest then we will suggest that the best place to do this is at Invoice Trades!