Electronic invoicing may play a vital role since it will usually accelerate invoice approval and the ability for the supplier to promptly discount the invoice/receivable.

The process may be manual, semi-manual or automated and a technology platform is often a central feature

‘100%’ financing is the norm less a financing discount.

The key ‘trigger’ for the provision of finance is the unconditional approval of the invoice or account payable for payment by the buyer this may be initiated through the creation of an approved payment instruction, which is unconditional and irrevocable, from the buyer to the finance provider, or evidence of approval of the invoice.

The seller(s) and finance provider(s) interact in relation to the provision of finance and on-boarding procedures including KYC/AML.

The buyer will usually have established a Payables Finance programme with the finance provider(s) for the benefit of all or a sub-set of its suppliers acting as sellers to it.

Lack of cor0070orate or signing officer authority, mitigated by legal due diligenceĪll the above risks are also mitigated by a robust monitoring, reporting and audit process regarding transactions, systems and controls.Pre-existing security arrangements, mitigated by waivers or their removal and completing perfection requirements or ensuring possession of a negotiable instrument.Risk of double financing, mitigated by KYC and perfection of ownership of the receivable or ensuring possession of a negotiable instrument as per the relevant jurisdictional requirements.Appropriate KYC/AML on the buyer and the seller, handled during the on-boarding procedures and subsequent post-transaction reviews.Operational risks resulting from multiple operational requirements to perfect ownership etc., mitigated by automation or ensuring possession of a negotiable instrument for the proceeds of the receivable.Seller dilutions handled by credit notes and offsets against invoices due for payment, mitigated by the ‘approved for payment’ undertaking given by the buyer.Default by the buyer, mitigated by careful risk assessment and monitoring.Whilst Payables Finance is often arranged by large corporate buyers and their finance provider, it can also be applied to non-investment grade and medium-sized buyers. The buyer acting as the ‘anchor party’ or programme arranger will have previously established a Payables Finance programme with a single or multiple finance provider(s) for the benefit of its (designated) suppliers. If there are any dilutions between the buyer and seller, it would be resolved outside of this Payables Finance structure. The buyer will pay the principal amount owed at the invoice maturity/due date or at another agreed upon due date directly to the finance provider. It is common that certain elements of recourse are retained against the seller, such as relates to breaches of representations and warranties. Such ‘without recourse’ relates to the credit risk or risk of non-payment by the buyer of the invoice or account payable. The finance provider relies on the creditworthiness of the buyer and typically grants the financing ‘without recourse’ to the seller. The buyer encourages its suppliers to consider the use of this Payables Finance programme the suppliers make an independent decision to utilise the programme.

The technique is ‘buyer-centric’ in that the buyer will typically arrange a payables finance programme with one or more finance providers in favour of its suppliers. the counterpart of the buyer’s payable on its own books) and receive an early, discounted payment from the finance provider. The buyer identifies an invoice(s) or account(s) payable (on its books) for which it has given an unconditional, irrevocable commitment to pay, and the seller has the option to sell the receivable(s) (i.e.

Factoring finance definition