Unconventional Products
Invoice Discounting
Invoice discounting is a financial transaction in which a business sells its outstanding invoices to a third party, known as a factor, at a discounted rate in order to receive cash more quickly than waiting for the invoices to be paid by the customers. The business (seller) assigns the right to receive payment on the invoices to the factor (buyer) in exchange for an advance payment, which is typically a percentage of the invoice amount. Invoice discounting is considered as a secured lending, as the invoices act as collateral for the loan, and the credit risk is primarily dependent on the creditworthiness of the customers. It is also considered as a flexible and quick way to raise working capital as compared to other forms of financing. Tenure is the range of 30-90 days while one can expect the product yield in the range of 10%-14%
Different types of invoice discounting
Sales Invoice Financing (SIF) – A seller approaches the financier to discount the invoices raised by them on the buyer / customer and requests the financier to pay him upfront on behalf of the Buyer.
Purchase Invoice Financing (PIF) – A buyer approaches the financier to discount the invoices raised on them by the seller and requests the financier to pay the seller on his behalf.
Asset Backed Leasing
Asset-backed leasing (ABL) is a type of financing in which a business leases equipment, real estate, or other assets from a lender. The lender typically purchases the assets and then leases them to the business. The lease payments made by the business are used to pay off the loan used to purchase the assets, and the assets are then used as collateral for the loan.
One of the main advantages of ABL is that it allows businesses to acquire assets they need without having to make a large upfront payment. Instead, the business can spread the cost of the asset over time through the lease payments. This can be especially useful for businesses that need to acquire expensive equipment or real estate but don’t have the cash on hand to make a large upfront payment.
Another advantage of ABL is that it can help businesses preserve their cash flow. By leasing assets, businesses can avoid the large upfront payments that often come with purchasing assets outright. This can help businesses maintain a healthy cash flow and avoid putting a strain on their finances.
Overall, Asset-backed leasing can be a useful tool for businesses to acquire assets, manage cash flow and preserve their capital and credit line. But it’s important to consider the terms, cost and risks associated with the ABL and the underlying assets before using it.
Tenure is the range of 15-36 months while one can expect the product yield in the range of 14%-18%
Venture Debt
Venture debt is a type of financing that is provided to early-stage or high-growth companies, typically in the form of a loan. This type of debt financing is typically provided by venture capital firms, specialized venture debt funds, or commercial banks. It is also known as venture lending.
Venture debt is similar to traditional debt in that it requires repayment of the principal amount borrowed, plus interest. However, venture debt is typically used to finance a company’s growth, rather than to refinance existing debt or to fund acquisitions.
One of the main advantages of venture debt is that it allows companies to raise capital without giving up equity in the company. This can be especially useful for companies that want to maintain control over their business or that want to avoid diluting the ownership stakes of existing shareholders.
Another advantage of venture debt is that it can be less expensive than other forms of financing, such as equity financing. Interest rates on venture debt are typically lower than those on equity financing, and the loan can be used to finance a wide range of expenses, such as R&D, working capital and marketing expenses.
However, venture debt is considered a higher-risk investment than traditional debt, as the underlying companies are typically less established and have a higher likelihood of failure. It’s important to consider the terms, cost and risks associated with the venture debt before using it.
Tenure is the range of 12-15 months while one can expect the product yield in the range of 15%-20%