What is Factoring?


Problems that companies face

In the growing stage

  • Increase in administrative staff
  • Entry into higher-risk markets
  • Increase in credit to clients

With seasonal activity

  • Difficulty in sizing their administrative staff
  • Large financial involvement in credit to clients

Recently incorporated

  • Absence of administrative staff (light structure)
  • Problems facing growing companies
  • Difficult access to credit

All companies have concerns

  • To reduce the risk of credit to clients
  • To reduce the immobilisation of credit with clients
  • To eliminate uncertainty in receipts
  • To have the ease of depending on someone whose job is to ensure collections

How factoring works

A - Submit an application to join

  • Fill in a questionnaire.
  • Applicant´s economic and financial data:
    - 3 most recent balance sheets;
    - most recent trial balance;
    - most recent trial balance of clients.
  • List of clients proposed for factoring with the following information on each of them:
    - Identification;
    - Address;
    - Normal purchase value;
    - Payment conditions;
    - Desired credit limit.

B - Analysis and decision to operate

Once these items have been submitted, the Factor shall define:

  • Payment conditions
  • Global limit assigned to the subscriber
  • Limit accepted for each debtor
  • Debtors on whom it may not agree to provide credit insurance.

C - The Factoring contract

Having reached agreement on these conditions, the subscriber and Factor sign a contract for one year, renewable.
These are the conditions for getting started with Factoring.

D - When is the assignment of receivables processed

The assignment of receivables takes place at the time in which the Factor agrees to accept the receivables included in a proposal submitted to it.