What is factoring?

Factoring is a set of financial services you receive in exchange for transferring your accounts receivable. It includes:

1. No-collateral funding.
Invoices you issue to debtors who have been transferred for factoring are immediately converted into ready cash.

2. Insurance against late payment.
A grace period is provided against the event of non-receipt of a buyer’s payment caused by their inability to pay or delayed payment.

3. Management of accounts receivable.
We conduct audits of your buyers’ ability to pay and business reputation, as well as daily monitoring of the status of accounts receivable. We provide access to special software with which you can track the status of your buyer's transactions in real time.

4. Collection of accounts receivable.
By transferring to us the tasks of analyzing your buyers' credit and collecting your accounts receivable, you free up valuable time so that you may concentrate on production, sales, marketing and other business processes which make your profits grow.

 

 

How factoring works:

1. You deliver  goods  to your customer (debtor) on deferred payment terms.
2. We advance you up to 85% of the payment due.
3. Your customer (debtor) pays us for the delivered goods when the payment is due.
4. We pay you the difference between the payment due and the advance, subtracting the factoring company’s fee.

Thus, you can do business just as if payment for the goods were being made in full up front, while your customers enjoy deferred payment terms.

Factoring is a no-collateral form of business funding.
Factoring is an alternative source of funding which creates no liabilities.
Factoring is a way to convert accounts receivable into money which can be invested in working capital.
Factoring is a modern approach to managing accounts receivable, risks and cash flow.
Factoring is a way to use your customers’ ability to pay, in order to gain access to an unlimited financial resource.
Factoring means financial freedom for your business.

 

The main types of factoring

1. Recourse factoring and non-recourse factoring.
In recourse factoring, the factoring company assumes the risk of late payment, but the seller retains the credit risk. Upon expiration of the grace period and if a debtor doesn’t pay, the supplier makes payment to the factoring company.
The seller’s risk is reduced because each customer undergoes a professional verification beforehand of its ability to pay.
In non-recourse factoring, the factoring company continues to work with the buyer on its own in the event of late payment. In that case, the factoring company assumes the entire non-payment risk.

2. Disclosed factoring and undisclosed factoring.
In disclosed factoring the buyer is informed that a third party, the factoring company, is party to the transaction. The buyer makes payments to the factoring company, thereby fulfilling its obligations under the supply contract. With undisclosed factoring, the seller has the right not to inform the buyer that factoring services are being used for the supply contract. The seller may continue to receive payments from the buyer, forwarding them to the factoring company.
Usually, non-recourse factoring is disclosed; recourse factoring may be either disclosed or undisclosed.

3. Domestic factoring and international factoring.
Factoring is considered domestic if the seller and the buyer, as well as the factoring company, are based in the same country.
Factoring is called international if the seller and the buyer are residents of different nations.