FAQ
What is Factoring?
Factoring is a type of liquidity financing for companies through the purchase of their outstanding receivables or the financing of their obligations to suppliers. It involves the process of selling regular receivables and converting them into cash that can be used immediately.
Who is Factoring For?
Factoring is an exceptionally useful tool for improving liquidity for companies across nearly all industries. While small and medium-sized enterprises (SMEs) are the primary users, factoring is also available to large companies and business beginners (so-called startups).
What is Recourse Factoring and Its Benefits?
Recourse factoring is a type of factoring where the company assigning the receivable guarantees its collectability. This means that if the factor is unable to collect the receivable from the debtor upon maturity, it has the right to seek reimbursement from the company that assigned the receivable.
Although this type of factoring is not widely popular among companies, it offers several advantages:
- Quick Access to Liquidity: Regardless of the debtor’s creditworthiness, the company can secure necessary liquid funds in a fast and straightforward manner.
- Psychological Impact on Debtor: The debtor is unaware of the recourse option, which can create additional psychological pressure to settle obligations on time.
- Collaborative Collection Efforts: The factor works alongside the assignor to collect payment from the debtor, increasing the chances of successful repayment.
Recourse factoring is a practical solution for companies seeking immediate liquidity while maintaining a collaborative approach to receivable management.
Benefits of Non-Recourse Factoring?
Non-recourse factoring is the most favorable type of factoring for the assignor of receivables, as the factor assumes the entire risk of collection. This arrangement provides the assignor with greater security and protection from potential losses. However, for this type of arrangement to be implemented, the debtor’s consent to pay within the defined timeframe must be secured.
Benefits of Factoring?
- Fast and Simple Access to Funds: With a prompt response to your request and an efficient approval process, Financial Solutions (FS) can disburse funds within 24 hours of submitting the required documentation.
- Improved Liquidity and Sales Growth: Factoring compensates for the lack of working capital caused by extended payment terms. It enhances liquidity management and enables better control, supporting increased sales growth.
- Enhanced Business Image: Improved cash flow and easier financial planning boost the company’s reputation. Additionally, timely settlement of obligations allows companies to secure significant discounts for advance payments or on-time payments.
- Access to Funds Regardless of Creditworthiness: Factoring provides liquidity without affecting the company’s credit rating or financial position with creditors.
- Positive Impact on Financial Statements: Factoring improves the balance sheet, making it easier for companies to secure loans from commercial banks or negotiate better loan terms.
Factoring is a powerful financial tool that supports business growth, enhances liquidity, and strengthens financial stability.
Types of Factoring?
Financial Solutions (FS) offers clients receivables financing services through:
- Recourse Factoring
- Non-Recourse Factoring
- Reverse (Supplier) Factoring: Designed for the purchase of a company’s obligations to its suppliers.
Reverse (Supplier) Factoring?
Reverse factoring allows you to settle obligations to your suppliers efficiently.
Benefits for Your Company:
- Extended payment terms.
- Cost savings through discounts for early payments.
Benefits for Your Suppliers:
- Satisfaction from successfully completing the transaction and receiving payment.
Long-term collaboration.