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I've never heard of invoice insurance but so called 'factoring' is a thing. Where you sell an invoice for cash now at a discount to it's face value to an inves
by pmorici 11y ago
I've never heard of invoice insurance but so called 'factoring' is a thing. Where you sell an invoice for cash now at a discount to it's face value to an investor. It achieves the same result of offloading any risk of non-payment to a third party.
https://en.wikipedia.org/wiki/Factoring_(finance) https://en.wikipedia.org/wiki/Factoring_(finance)
- tptacek 11y agoRight, but I was under the impression most factoring arrangements were with companies that actually sold things. I'm not sure I see how factoring, discounting, or insuring of consulting invoices could even work. It can take 6 months to get a client to the point where they recognize a payable, and at that point they still often dispute or delay over acceptance criteria. How could a financing company possibly assume those kinds of receivables?
- notahacker 11y agoIf there's an invoice for a non-trivial sum and a legally enforceable claim, there's a price at which someone will be willing to buy the invoice, even if that's pennies on the dollar. Obviously your invoices are discounted by less if you have proof of shipped goods, the client is a blue chip with a history of prompt past payment and the invoices aren't overdue yet. But consulting assignments with signed contracts and agreed invoicing schedules are fair game.
- tptacek 11y agoI'd be interested in hearing from anyone who has ever done this with a consulting receivable, where the person they sold the receivable to wasn't a friend or colleague or something.
- notahacker 11y agoThere's certainly no shortage of companies advertising it as a service, and I'm pretty sure my friend's pretty standard micro web agency has used them before. I certainly doubt Matsano would have had much problem factoring their invoices had it made financial sense to do so Randomly-selected examples: http://www.fastarfunding.com/internet-consulting-factoring/ http://www.fastarfunding.com/internet-consulting-factoring/ http://www.comcapfactoring.com/blog/factoring-financing-for-consulting-companies/ http://www.comcapfactoring.com/blog/factoring-financing-for-... http://www.factoring-invoices.com/consulting/ http://www.factoring-invoices.com/consulting/
- tptacek 11y agoI'd be interested in hearing from anyone who has used any of these services. Of course, they're not super relevant to this thread: factoring companies assess the creditworthiness of clients. Most startups have no credit.
- Mandatum 11y agoHow is this any different to selling a debt?
- pmorici 11y ago"selling a debt" usually means that it is being sold after the payment is already delinquent. Factoring takes place before there is ever a hit of trouble with payment.