Invoice financing is like the ancient barter trade with more than two participants. Imagine that you are selling the perfect dye for the nobleman clothes in times before the money. If you don’t need anything in return, both would have to remember or write an IOU statement (I Owe You). Or, you could take some eggs from the local that owns a favor to the nobleman.
To support the trade, and make corruption transparent, the first money came to the light of the day. Joke aside, the king of Lydia minted the first coins in the sixth century BC.
Not joking either, it took twelve more centuries for the first paper money. Finally, the first money printing in Europe was happening in the 17th century, eight to eleven centuries later.
Even though we are still using paper money, digital payments would logically rise. Whether cryptocurrencies will prevail or not, the underlying blockchain technology will stay. It is because of the chance to solve the problem present from ancient times, making the tamper-proof IOUs.
But how can blockchain further improve this process? Moreover, what is the role of invoice financing in this?
Invoice Financing as the Improvement for the Trade
First of all, the need for the marketplace was the cornerstone for building first cities. Logically, people wanted to trade the goods they didn’t have in their surroundings.
Over time, the ancient marketplaces started trading the goods from places far away. For example, tin bars found in Israel, dating from the 13th to 12th century BCE, originate from England. To make it more interesting, Cambridge University Press published the writing on the use of America’s tobacco and coca in ancient Egypt!
There is no much explanation for these anomalies, but limitless human needs. As time was passing by and trade improved, these needs advanced. In the 21st century, production and procurement are so complex. As a result, vast numbers of people work only on data analyses.
Logically, analytics and building supplier relations could lead to a better price. It is because possible cost-cutting could lead to a competitive advantage, making a breaking moment in the business. When the opportunity arises, your company should have the liquidity to take chances.
But what happens if you don’t have the finance that is needed? In many cases, companies turn to credit lines. However, only 18% of SMEs collaborate with the banking sector. Due to the lack of trust, banks rarely approve credit lines for these businesses.
For this reason, SMEs turn to invoice financing. By Investopedia, invoice financing is borrowing money against the amounts due from customers. Sounds easy, right? Since your clients would eventually pay, you are just taking the money upfront. In the case of catching the excellent price, or solving some issues – banks’ fees seem like a nuisance.
Therefore, invoice financing does improve trade by solving the liquidity issues. However, although there is a proof of account receivable, the approval rate for the loan against the invoice is not different.
Blockchain Technology Improving Invoice Financing
The reason behind banks’ rejections is the lack of trust in the validity of the invoice. By no means unjustified, as frauds in invoice financing account for 450 million euros per year.
Utilizing the Blockchain to Enable a Trustless Platform
Blockchain technology, apart from cryptocurrencies, enables tamper-proof records. Why is this important for invoice financing?
Well, it is quite simple, every invoice and all its alterations become blocks in the so-called blockchain.
Because of this, everything stored in the blockchain serves as indisputable proof in two ways. First, as a record of the account receivable, enabling the credit line. Second, as the evidence of the fraudulent activity, causing the penalty. All are happening automatically, allowing the trustless process.
Stopping the Double-spending
Furthermore, advantage of the blockchain platform is that it removes the possibility of making a loan against an invoice twice. Since all banks and other lenders have permission to access the platform, the data is transparent.
In this case, it means that the document number and credit line approved are visible to third parties. Notwithstanding the fact it is the data provision, banks are already sharing the information on clients.
Non-disclosure of the Data
An innovative side of the Infidia is the cryptographic model of presenting only the relevant data. All that is visible is the number, the client, and the date of the delivery of goods and services.
For this reason, there is no possible data leakage, as the products and the terms of sales are not visible.
Nowadays, modern-day trade is embracing the business technology. One of these is the blockchain and the innovation that Infidia brings. As soon as you sell goods or services, Infidia is enabling the seamless credit lines. Therefore, solving the ancient IOUs issue.
Moreover, Infidia is offering the free proprietary ordering solution, facilitating your trades. In most cases, making an order via Infidia makes the whole process even more comfortable. However, there is a possibility to use your existing solution, while Infidia is adding the security layer.
Since making it fraudulent free, and non-disclosing the data, we are making the new rules of the game. Like never before, this game is made for the players with good intentions. Since tamper-proof, trustless, and corruption-free, Infidia is the flagship of the new era of invoice financing.