Fine Results With Business Options Now

Today, such a service is gaining popularity in the business lending spectrum, like factoring. Almost every financier at least once in his life wondered “What is factoring?”. To give an exhaustive answer to this question, within the framework of this article, we offer to characterize this service and discuss its features. Financial factoring is a variant of lending to small and medium-sized businesses, which provides the seller with an opportunity to further collect debt from the buyer. That is, the supplier company transfers the debts of the debtor to the factoring company acting as an intermediary, and she, in turn, is engaged in the return of funds.

Internal factoring is characterized by the presence in one country of a factoring company and parties under sales contracts.

  • Factoring without recourse is a transaction in which the factor buys from the client the rights to amounts that will subsequently be collected from the debtor company. The peculiarity of this type of factoring is that if the debt cannot be covered in full, the factoring company pays its client this amount.
  • Factoring with recourse is in its turn a service in which the factor buys from the client the rights to the amounts that the debtor must pay, but if the debt is not fully available, then the client who assigns the debt is obligated to pay the rest of the funds to the factoring company. With factoring invoices offered the options now.
  • Closed and open factoring is a source of financing, which happens either without notice or with notification of the assignment of the debtor.

Stages

Now we will discuss what stages of factoring you need to go through in order to get financing. The process of factoring proceeds in 5 stages. The first stage is the provision of goods or services to the customer with a deferred payment. Further, if the client detects debt on the loan, the seller sends documents confirming the debt to the factoring company. Then the factor covers the debt of the buyer, after which the owed company must make payment for the goods or services provided. The last stage is the conduct of negotiations between the creditor and the debtor, during which they must resolve a number of financial issues with each other.

 

Comments are closed.

  • Partner links