Article 12

What is invoice trading?

1) In a nutshell

Invoice trading platforms allow businesses to sell individual invoices in order to free up cash, to an online community of investors. The concept takes the principle of peer-to-peer lending and applies it to invoice finance.


2) Also known as…

Invoice finance; Invoice discounting; Peer-to-peer lending


3) How it works

  • A business applies online to become an approved member of the invoice trading platform.
  • Once approved, a client bank account is set up and the business can sell an invoice (as small as £1,000 and as large as £1m+) on the invoice trading platform.
  • The invoice trading company electronically verifies the invoice. Once verified, it is sold on the platform, where multiple investors buy slices of the invoice.
  • The business receives funds in their account as an advance up to 90% of the invoice face value within 24-48 hours.
  • When the end debtor pays their invoice into the client bank account, the invoice trading platform makes the remaining balance available to the business, minus their fees.

See more about how MarketInvoice works here.


4) Advantages

There are many advantages for businesses and investors in using invoice trading platforms. Businesses can access finance quickly, often within 48 hours, and all online. Investors are able to earn good returns on their money through a diversified portfolio. Also, because investors on these platforms are from across the globe, invoices due to foreign debtors because of export activity can be funded easily.

MarketInvoice is the UK’s first and largest invoice trading platform. We offer investors a new way to trade invoices. Our product is very different to the main alternative, invoice factoring.

Our three main advantages are flexibility, speed and our customer service. In terms of flexibility, using MarketInvoice you can sell the invoices that you want, when you want, putting you back in control of your cash flow. Unlike traditional invoice discounting, there is no obligation to discount your entire debtor ledger, and no lengthy lock-in periods.

With us you can get set up and funded within 24 hours and our customer service has been rated "Excellent" on Trustpilot.


5) Glossary

Verification
An invoice trading platform will typically verify invoices that are sold in order to make sure they are real and not fraudulent. Most verification is done electronically, via email or using cloud-based tools, so that the debtor is not inconvenienced.

Diversification
The investor community on an invoice trading platform is looking to earn good returns through buying client invoices. In order to keep the risk as low as possible, investors look to diversify their portfolio by buying small slices of lots of invoices on the platform.


6) Next steps

Also see… peer-to-peer lending; factoring; invoice discounting; selective invoice discounting


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