Who are you?
We are Fluid P2P (the P2P stands for "peer-to-peer"). In a nutshell, we are a digital platform bringing together sellers and investors.
What sort of sellers and investors?
Sellers of invoices. Typically small and medium-sized businesses can sell their unpaid invoices through the platform, directly to investors, who could be anyone. When or if the invoice customer pays up, the seller transfers the full settlement to the investor, securing a return for the investor.
Did you come up with this idea?
No, sadly not. Invoice financing is an idea as old as commerce. The sale of the invoice - rather than its use as collateral for borrowing - is sometimes called debt factoring, or invoice factoring. A business which needs cash in the short term will sell its invoice, and the buyer receives a return if or when the business's customer settles the invoice.
The invoice buyer's return rewards them for: a) the credit risk they are bearing, since the customer may default on the invoice, and b) the time during which they have forgone their investment.
What we have done is evolve that basic principle into a peer-to-peer digital platform. Instead of an institution buying up a business's invoices, ordinary investors can buy them up - or buy them up in part. This allows ordinary investors access to a unique asset class and potentially strong returns (although investments are always at risk), and businesses can access factoring in a way which is flexible, fast and cheap.
So far, so good. What's the downside for sellers?
Actually, there are a number of downsides:
- Large debt factors have significant market power, and can force unfavourable terms (for example, large discounts) on sellers
- Debt factors typically demand some form of collateral, against which they have recourse should an invoice customer not pay in full
- In the case of non-recourse debt factoring, discounts to face value can be steep
- "Credit management" fees based on a percentage of income may be charged
- Debt factors will normally require exclusive access to all of the seller's accounts receivable
Our platform allows businesses to sell or auction their invoices on a peer to peer basis. No exploitative factors, no collateral, no exclusive access. Flexibility to sellers, and a good deal for investors too.
So everyone is happy?
Yes, although as an investor you should be aware that capital is always at risk.
Below we have set out some answers to frequently asked questions. If you have any other questions, please don't hesitate to get in touch with us at firstname.lastname@example.org, and we will be delighted to help you.
Frequently Asked Questions
Q. As a supplier, how to I upload invoices?
A. It couldn't be easier. Just like with most auction websites, select the "Sell" option on the homepage. This will prompt you to enter the details necessary to upload an invoice for investors to bid on.
Q. How long do the auctions last?
A. As long as the supplier wants. As with any auction site, when the invoice is initially uploaded, the supplier sets the length of the auction. It could be an hour; it could be a month. The supplier will want to keep in mind that the closer an invoice comes to its due date (or, if unpaid, the more time elapsing after its due date), its value may change in the minds of investors. For example, if an investor knows that an invoice is due to be paid in three days, she may be willing to pay more for it than if it were due to be paid in thirty days. Similarly, if an invoice is two days overdue for payment, an investor may be willing to pay more for it than if it if were twenty days overdue.
Q. What actually happens when an invoice is purchased?
A. Whether purchased outright or with a winning bid, ownership of the invoice (and underlying rights to income) pass to the buyer. The good or service which the invoice concerns does not pass to the buyer, and nor does it represent collateral if the invoice customer does not pay, pays late, or underpays.
Q. Is the invoice customer notified when an invoice is sold or auctioned?
A. As part of our fraud-prevention measures, we request the seller's permission to contact the invoice customer in order to verify whether the invoice the seller has placed on the FluidP2P platform is valid. If that permission is not granted, we will not contact the invoice customer to verify the invoice.
Q. What if, while the account receivable is being auctioned, the customer pays the supplier?
A. An invoice is put up for sale on FluidP2P by the supplier, but then the customer unexpectedly settles the invoice early, before it can be sold, and there is no longer an amount due to the supplier. When this happens, the supplier is required to end the auction immediately. If an invoice is sold via FluidP2P even after the customer has paid, the supplier is nonetheless contractually obliged to sell the account receivable to the investor for the agreed amount.
Q. What if the customer never pays, or underpays?
A. Any investment is risky. The key risk with invoice financing is that the customer does not pay, pays late, or underpays. This is often called "credit risk". This may occur for many reasons (cash-flow issues, a dispute over the invoice amount, etc.). FluidP2P will automatically chase debts on your behalf, and in the continued absence of settlement we can refer you to a debt recovery firm. This may be a useful way of minimising a loss or securing a return.
Q. As a supplier, can I set a minimum reserve price for an invoice?
A. Yes, just as with most auction websites, it is possible to set a minimum reserve price - the lowest you will be willing to sell the invoice for. This is kept secret from bidders. If bidding fails to reach the minimum reserve price by the time the auction finishes, the invoice can be withdrawn (i.e. not sold), or sold for the highest offer.
Q. What if I want to invest in an invoice, but the price is too high for me to afford?
A. Where the seller has elected to use a direct sale format (i.e. where you can see a "buy now" option), and they have allowed "part sale", you can buy a percentage of the invest (as little as 1%).
Q. What is to stop the seller from keeping the investor's money and not transferring the settlement?
A. The seller is contractually obliged to transfer any settlement from their invoice customer to the investor. Of course, that does not mean that an unscrupulous seller could not theoretically withhold payment intentionally. Whilst an extremely rare occurrence, we have a number of tools at our disposal, geared towards detection and deterrence:
1) Failure by a seller to transfer its customer's settlement in full to the investor is a breach of contract, which is a civil offence. This means the seller can be sued for damages, which can - depending on the circumstances - be significantly larger than the amount which the seller has unlawfully retained. In all cases where a seller has deliberately or negligently withheld its customer's settlement, we will apply to the courts to have any and all responsible individuals disqualified from holding a company directorship.
2) Failure by a seller to transfer its customer's settlement in full to the investor may, depending on the circumstances, constitute a criminal offence, meaning the seller can be prosecuted. We will work with law enforcement agencies (including those concerned with financial crime) and anti-fraud organisations to ensure that sellers who break the law in this regard are prosecuted.
3) Our algorithms can detect suspicious behaviour by sellers, including listing fraudulent invoices, and/or posing as both invoice customer and seller. Any such behaviour will result in the seller being barred from the Fluid P2P platform and reported to law enforcement bodies.