Hive Project Whitepaper

Abstract

Invoice financing is a general term used in asset based lending for products which allow companies to get
finance for their slow-paying accounts receivable. Once a buyer receives goods, a buyer has 90–120 days to
pay for them. But is there any way that the seller can get their funds faster? Well, this can be achieved by
selling invoices to a factoring company. In exchange for immediate payment seller of the invoice pays interest
rate to lender (buyer of the invoice) – factoring company. And factoring company collect final payment in 90-
120 days, profiting from the initial fee / interest rate. But why do companies need their invoices paid faster?
For cash flow reasons. They need funds in order to buy materials, pay for the production of goods or even to
pay their employees’ salaries in order to continue operation and not wait sitting for 90-120 days until final
payment. This is called invoice factoring.

Invoice factoring is a form of invoice financing that allows companies to sell their accounts receivable to
improve their working capital. This type of financing provides business with immediate funds and liquidity they
need for continuous operation. Factoring is easier to obtain than conventional financing because you are
technically selling a liquid asset rather than getting a loan. The most important criterion to fulfil is that the
invoices submitted are from creditworthy commercial clients. This makes factoring the perfect solution for
SMEs that do not have substantial assets or a long credit history.

Invoice financing can be structured in a number of ways, most commonly factoring or discounting. With
factoring, the company sells its outstanding invoices to a lender, who might pay the company 70% to 95% of
what the invoices are worth, up front. Assuming the lender receives full payment for the invoices, it will then
remit the remaining 5% to 30% of the invoice amounts to the business.

This whole process involves a lot of manual work. It involves manually checking if invoices were submitted to
creditworthy commercial clients, if those clients agree with factoring of the invoice, if they confirm that goods
or services were are really delivered, etc. And all of this needs to be confirmed by written and signed
agreements. This whole process is costly and time consuming which prevents SMEs to utilize factoring for
smaller amounts. Also some of the bigger clines (for example food stores and chains) by default disallow
transfer of invoices to 3rd parties in order to reduce their manual work increase and to reduce risk of paying
into wrong account.

And this is precisely the gap that the HIVE Project is looking to fill. Through HIVE, an entirely new market is
opened up which provides liquidity to SMEs that are not able to get invoice factoring from traditional
institutions. Put simply, it’s a game changer for the industry.

Hive Project Website
Hive Project Whitepaper

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