What is factoring?
Factoring is a great way to raise funds for ongoing financing of an company's receivables
What is it about?Factoring is the fastest growing financial service for companies, which consists of the purchase, financing and management of receivables by a financial institution.
Thanks to factoring, it is possible for the supplier to receive payment for sold goods or services in the form of an advance immediately after sending the invoice statement to the Factor. The advance payment, depending on the terms of the factoring agreement, may amount to 90% of the invoice amount. The remaining part of the receivable is transferred after receipt by the agent of payment from the recipient. The advantage of factoring is the support of the factor, which can ask for payment on behalf of the supplier. In addition, in the case of full factoring, the factor assumes the risk of insolvency of customers. As a result, the Factor is protected against bankruptcy or a long delay in payment by the recipient.
Factoring is also a quick way to release funds frozen in invoices. When the company expects the repayment of invoices issued for a product or service sold, it is not able to use all available funds. If the obligation is transferred to the factor, these receivables will be immediately financed.
How does it work
Good to know.
OUR FACTORING SERVICE IS BASED ON REPLACING CASH RECEIVING.
The Customer can dispose of the receivables that are due to the recipients for the delivery of the goods with the offer from Coface to the recipients an additional period for repayment of these receivables.
When you issue an invoice and send the goods to the recipient, you lock those funds and limit your current financial liquidity. The financial liquidity is restored when the recipient pays the amount due. Temporary drops in liquidity may be harmless for your company, however extended payment terms, such as 90, 180, 270 and more days can be a serious limitation of the company's operational efficiency.