5-minute read

What is Invoice Trading?

Published on May 20, 2021

invoice-trading marketplace

The financial crisis of 2008 and the resulting reluctance of banks have led individuals and companies to turn to alternative financing solutions. As a result, today’s financial managers have access to many solutions to manage their cash flow outside the traditional financial channels. Invoice trading is one of these alternative solutions. Although this option is still little known, its potential is no less impressive. Let’s take a look at it.

Invoice Trading: an alternative financing solution

Invoice Trading: Definition

Invoice trading is a process in which a company borrows money from an investor through unpaid or overdue invoices. The invoices then serve as a guarantee of payment. This alternative financing solution is based on Invoice Trading platforms, which allow companies to sell their invoices to an online community of investors.

The Invoice Trading platform connects companies with cash flow problems with investors looking for short-term investments. The investors are generally investment funds that pay in advance the invoices assigned to the platform to receive the interest associated with the deferrals. In line with peer-to-peer lending, this process allows companies to generate cash flow through an alternative financing solution, outside the traditional banking model.

For what type of company?

This system can be used by companies of all sizes, when they want to improve their cash flow quickly and without being tied to a contract, that can be the case with traditional factoring contracts. Businesses establish a relationship with invoice marketplaces when they are looking to improve their capital. This alternative solution also allows them to generate cash that can then be used to improve their short-term liquidity, pay expenses, or even make new investments necessary for their operations. For some companies, Invoice Trading is very interesting as it frees up cash flow. Maintaining working capital and managing growing demand is not easy, especially for SMEs. In the case of customers with long payment terms or payment conditions of 60 or 90 days, Invoice Trading allows the company to invest without delay.

How does Invoice Trading work? 

Invoice Trading involves 3 entities:

  • One or more investors;

  • Several companies willing to sell their receivables;

  • An Invoice Trading platform that connects the two.


The classic Invoice Trading process is relatively straightforward, particularly because the platform acts as a trusted intermediary.

  • The company that wishes to assign invoices starts by registering on the Invoice Trading platform and submitting its profile to become a member.

  • Once the profile is approved by the platform, a customer account is created. The company can then offer for sale the invoices it wishes to transfer.

  • The platform is then responsible for verifying the invoices, then posting them online, and making them available to investors.

  • In addition to these invoices and transaction details, investors have access to scoring and a range of information about the company.

  • One or more investors may then purchase shares of bills or entire bills. Diversifying the purchase of invoices can be a way for investors to limit risk.

  • Once the purchase is made, the selling company receives the funds in its account. The advance can be up to 90% of the invoice amount and can be paid within 24 to 72 hours (even within minutes, for partners using the Faster Money-out* service which operates the RT1 – Instant payments network).

  • When the debtor company finally pays the invoice, the Invoice Trading platform balances the remaining amount and pays it to the investor, subtracting an administration fee and an additional amount, which is returned to the transferring company.

What are the advantages of Invoice Trading?

For companies that resell their invoices

While the main advantage of Invoice Trading for companies is quick access to liquidity to meet cash flow needs, there are many other advantages. First of all, this alternative financing solution is quick and easy to set up, entirely online. Second, it offers total control and flexibility. Companies sell invoices only when they deem it necessary, choosing the invoices concerned and, consequently, the debtors involved. Invoice Trading also guarantees the confidentiality of companies. In most cases, the debtors will not be notified of the company’s action, which does not affect their business relationship. Secondly, as the investors on invoice marketplaces are generally international, foreign invoices can be financed easily. The final advantage for companies is that no collateral assets are required.

For investors

The invoice marketplace is also very interesting for investors. This process allows them to achieve very good returns on investment by diversifying their financing. Unlike other types of loans, this one integrates an invoice as a guarantee, which limits the disappointments and brings a certain peace of mind to the investors.

Invoice trading is currently only the smallest segment of alternative financing solutions. However, it is the fastest-growing method, especially in Italy and Spain. The potential of this alternative solution is indeed impressive, especially considering the volume of invoices due on the market.

Invoice trading regulations vary greatly from one country to another. If you have a project, do not hesitate to contact us to learn how we can support the implementation and management of your financial flows!


*For outgoing payments made to eligible banks, which include this service.

Case study: Estateguru - How to pursue borderless expansion and reach 5bn€ of annual loan volume in 3 years?

Share the article

Looking for fresh ideas?

Looking for
fresh ideas?

Get monthly tips, best practices, and the hottest marketplace payment trends—right in your inbox.