02 Feb 2012 Reverse factoring becoming the norm in Spain
Driven by unprecedented economic conditions and government intervention to help small business, reverse factoring is rapidly becoming the de facto form of payment in Spain.
According to an incisive article at ASYX, a new law aimed at easing effects of the liquidity constrained Spanish economy has helped contribute to an 18% annual growth in the use of reverse factoring as a settlement mechanism.
Reverse factoring, like traditional factoring, is initiated by a supplier and is designed to facilitate early payment. Unlike tradition factoring however, the supplier make arrangements with their trading partner to take advantage of their customers’ superior credit rating. A third party bank added to the mix allows early payment without impacting the DPO of the buying organization. (See here for a detailed explanation on reverse factoring.)
According to ASYX, in Spain, reverse factoring is rapidly moving from being a relatively obscure source of supply chain finance to becoming one of the most popular B2B payment methods.