Invoice trading: What is it and What are the best Platforms

Invoice trading is an alternative type of financing which consists in the transfer of some commercial invoices in order to obtain liquidity. It involves three main players: the company, also called transferor, which chooses which invoices to transfer; the investor, who buys the invoices and advances their balance net of his remuneration; and finally the digital platform, which make this type of service possible.

Invoice trading is regulated by the governments and their legislation. These rules establish that the creditor can transfer his credit even without notifying the debtor. However, the credit must not be of a personal nature and the transfer must not be prohibited by law.

Invoice trading is widely used in Italy: in the twelve months ending in June 2021, the value of the invoices transferred was equal to 1.24 billion euros. The success of these platforms in Italy is probably due to the difficulty, especially for SMEs, in accessing credit.

Invoice trading: how it works

In invoice trading the company interested in the transfer of one or more invoices must register on a suitable platform which evaluates the proposal and assigns it a vote. The score derives from some objective indicators and from databases controlled by external suppliers.

Naturally, not all companies can access these platforms, some requisites are in fact necessary, including: being a joint-stock company, having a consolidated turnover, having a financially solid clientele.

Furthermore, not all invoices can be put up for sale: those issued by subjects other than joint-stock companies, those issued by the Public Administration, those expired and those disputed are generally excluded.

If the invoice is deemed suitable for sale, it is published on the platform and made visible to investors who can purchase it in various ways, including:

• upward auction,
• competitive offer or direct purchase by the platform,
• securitization of the same through Asset backed securities (ABS)

There are two main assignment methods: with recourse, in which the assignor remains liable in the event of non-payment of the balance; or without recourse, in which the transferee (who buys) assumes the risk of insolvency. Many invoice trading platforms use this second model, however the activation of guarantee mechanisms is also envisaged in order to cover the risks.

Once the transfer process has been finalised, the investor generally has 48 hours to deposit approximately 90% of the invoice amount. The invoice trading platform holds the rest of the money as a form of collateral and then liquidates it upon invoice maturity, net of investor remuneration.

How to sign up for an invoice trading platform

For a company, signing up for an invoice trading platform is simple, you just need to present the necessary documentation.

To be admitted to the sale of invoices, companies must submit certain documents:

• the certificate of incorporation,
• the identity card of the controlling shareholders,
• a document certifying the ownership of the current account on which to receive the advances,
• the documents useful for verifying the invoice to be collected.

Invoices can generally be uploaded in .pdf or .xml format, together with any accessory documents.

The advantages of invoice trading

Why should a company do invoice trading? The advantages that this alternative financing method offers are many, let’s see which ones:

• allows you to obtain liquidity quickly, without having to ask for traditional financing;
• has lower costs compared to those of a traditional loan. What to take into consideration are the costs of the platform and a commission paid to investors (1%-2% of the invoice value).
• there is no notification to the Central Credit Register and therefore the possibility of applying for other loans as well;
• is very flexible: the company that transfers the invoices can itself choose which ones to transfer;
• Finally, invoice trading platforms tend to be simple to use and can be managed directly from your smartphone.

Invoice trading: 10 platforms

Browsing online, there are many invoice trading platforms that can be found. Here are some:

• Anticipay: part of the Zucchetti Group from 2021, allows you to purchase only invoices of at least 5,000 euros.
• CashInvoice: platform managed by the company of the same name, it has been active since 2017. It allows you to purchase invoices of at least 5,000 euros.
• CashMe: since the end of 2018 this platform has become part of the Finservice group. To access it, companies must have deposited a balance sheet with a turnover of at least 500 thousand euros.
• Clevera.biz: managed by Clevera Spa, it was founded by Ottavio Conigliaro. On this platform, SME can sell their trade receivables, both expired and unexpired, to institutional investors.
• Demetra Capital.com: this platform is controlled by DemetraCapital Srl, it is mainly active in the steel, agri-food, real estate and financial sectors.
• Cash Out Now: the invoice trading platform of the Team System Group. The minimum amount for invoices to be uploaded to this platform must be 1,000 euros.
• Polaris: owned by the Txt group, to access this service, companies must be joint stock companies with a turnover greater than or equal to 1 million euros.
• Workinvoice: operational since 2015, it is one of the most successful platforms: in the first half of 2022, there were 1,060 invoices transferred through Workinvoice for a total of 85 million euro.

Original article published on Money.it Italy 2023-02-09 17:18:44. Original title: Invoice trading: cos’è, come funziona, le piattaforme