Factoring: a practical guide
What is factoring?
It is a solution to short-term receivables that enables enterprises to manage cash requirements better.
The factoring contracts are aimed at all companies working with a clientele of companies.
The principle of factoring is very simple. The client company assigns its trade receivables to a so-called “factor”, which serves as a counterpart:
- Financing: without waiting for the due date of the relevant invoices, the company receives, based on its cash requirements and in a short time, all amounts assigned or part of them. The company can count on diversified sources of finance, which fosters its commercial development.
- Administrative management of the relationship with the customers being transfered to specialized personnel in the field: reminders, amicable recovery of debts, legal actions, management of the payments received…
- A guarantee for the company to be paid even in the event of the default of its customers (in the case of non-recourse factoring).