About Factoring
What is Factoring?
Factoring is a short-term financing solution that involves the purchase of accounts receivables with a maturity date from 30 up to 180 days, which arise from the sale of goods or services on the domestic or foreign markets. Factoring allows for quick access to financial assets based on delivered goods or services and at the same time presents an opportunity to handle the delayed payment days and greater cooperation with the buyers.
Factoring includes the sale of invoices and their conversion into cash, which improves the company liquidity without displaying any increased debt in the balance sheets and without using additional collateral.
How Does it Work?
- The financial institution (Factor) evaluates the creditworthiness of the company and its clients and approves credit limits;
- The company sends invoices which the client confirms;
- For every purchased invoice, the company receives an advance of 70-90% of its value;
- As soon as the invoice is paid, the rest of the amount, less the factoring fee is transferred to the company account.
Why Choose Factoring?
- Factoring enables quick access to financing which in turn improves company liquidity. Thus, factoring stimulates company growth;
- Unlike a bank loan, factoring does not require additional collateral/guarantee;
- Factoring provides instant access to turnover capital which enables the companies to finance their current operations without having to wait for the invoice to become due for payment, which usually lasts between 60 and 120 days or longer;
- With this type of financing, a company is able to charge its invoices on time, to provide the necessary capital for running the business, to pay the suppliers and employees and to promote company growth.
What Are the Key Benefits?
Access to turnover capital
Quick financing
No additional collateral
Improved liquidity
Increased sales and growth
Flexible payment conditions
Competitive advantage