Pre-financing and related risks

Prefinancing in Switzerland Prefinancing in Germany
Description of the product
  • You give a company an unsecured short-term loan
  • You have no claim on the invoice as there is no actual sale or cession of the invoice
  • You give a company a short-term loan
  • The contract in Germany differs from the Swiss contract as it involves a sale and cession of the invoice
  • The debtor is not informed about the cession and once he pays the invoice to the seller you no longer have a claim against the debtor
  • Advanon can demand the payment from the seller if the invoice is delayed or the debtor defaults
Legal claims
  • Against the company on basis of the loan contract
  • The company must pay back the loan regardless of the invoice being paid
  • Against the debtor on basis of the invoice sold
  • Against the seller once the debtor pays the invoice to the seller account, or via recourse in case of delay or debtor default
Credit Risks
  • Default of the seller company
  • Unsecured loans have no collateral
  • In case of default, the claim of the investor is ranked as a creditor of the lowest (third) priority
  • In the case of seller default, you can lose your entire investment
  • Debtor default: debtor cannot pay the invoice

→ Recourse of the invoice to the seller

  • Seller default and if the debtor already made the payment to the seller

→ The risk is shifted to the seller after debtor payment

  • In case of default, the claim of the investor is ranked as a creditor of the lowest (third) priority
Fraud Risk
  • Forging of financial statements

→ These are not audited statements, we have a risk-adjusted approach to verify them but cannot entirely eliminate this risk

  • Forging of invoice: we are not allowed to contact the debtor for verification
  • Forging of financial statements

→ These are not audited statements, we have a risk-adjusted approach to verify them but cannot entirely eliminate this risk

Operational Risk
  • It is not possible for Advanon to control whether the seller has received the invoice payment and used the funds to pay us. The company has no legal obligation to use the funds in that way.
  • Payment by the debtor is made to seller account, over which Advanon has no control
  • Not possible for Advanon to control whether the seller has received the invoice payment and used it to pay Advanon.

→ This makes this product very similar to an unsecured short-term loan

Updated on May 13, 2019

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