Reverse Factoring: A Theory on the Value of Payment Terms Extension

Spyridon Damianos Lekkakos and Alejandro Serrano

Foundations and Trends(R) in Technology, Information and Operations Management, 2017, vol. 10, issue 3-4, 270-288

Abstract: Reverse factoring is a financial instrument that large creditworthy firms use to facilitate low cost financing to their suppliers by confirming future payment obligations to financial intermediaries. This paper studies the implications of reverse factoring on the buying firm’s capital investment decision in the face of deadweight costs for external financing. Our results show that the implementation of reverse factoring with payment terms extension can facilitate higher investment to the benefit of the integrated supply chain.

Keywords: Supplier financing; Supply chain finance; Cost of capital (search for similar items in EconPapers)
JEL-codes: G20 G32 M11 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:now:fnttom:0200000063

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