Partial shipment

Understanding Partial Shipment in Financial Factoring

Partial shipment refers to the delivery of a portion of an order or a segment of the total goods involved in a transaction. In the sphere of financial factoring, this practice can impact the way businesses manage their cash flow and invoice financing agreements.

How Does Partial Shipment Work?

Imagine a business that has sold a large order of products to a buyer. Instead of shipping all products at once, the seller sends out the goods in smaller, separate consignments, which is called a partial shipment. Each of these shipments can generate individual invoices.

The Connection to Factoring

When a company uses factoring, they sell their invoices to a factoring company at a discounted rate, in return for immediate cash. If the original sale is split into multiple partial shipments, there could be several invoices. Companies often choose to factor these individual invoices as they are raised, allowing them to get quicker access to funds rather than waiting for the entire order's payment to come through.

Benefits of Partial Shipment in Factoring

This method can benefit businesses by enabling steady cash flow. Instead of waiting for the full payment after the total delivery, companies can maintain liquidity by factoring invoices from partial shipments as they are sent and paid.

Considerations for Businesses

Businesses must weigh the pros and cons. While factoring invoices from partial shipments can enhance financial flexibility, it also means managing multiple invoices and potentially higher factoring fees. It's essential to understand these factors to make informed decisions.