Factoring: what is it, and how to use it properly

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2018-03-18 14:01:22

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what is factoring

Local companies involved in the sale of goods, often face a problem when selling their products, only prepaid can scare off most buyers, and in the application of the deferred payment, the seller loses a substantial amount of money in circulation which are necessary to implement the financing of economic activity. This problem allows you to solve such a thing as factoring. What is this procedure and how it can be successfully used in the operation of business?

In accordance with applicable law, this concept means the financing under a concession of the rights to the cash requirement. The factoring agreement is often referred to credit sales. Today this procedure is carried out mainly due to the banks having such right in accordance with the special law.

factoring agreement

However, any credit or a commercial organization may carry out factoring. What is factoring? It is an activity that needs to be confirmed by a relevant license. But today has not yet adopted any legal document which would regulate such licensing.

Usually the calculation of the factoring is carried out according to the following scheme. Enterprise is a contract for the provision of services with the financial agent designated in this document as a factor. In accordance with this agreement, the seller under the sale of goods does not receive directly from the buyer to pay for it, and assigns the right to require that fee to the buyer the financial agent. Interestingly, the supplier is not liable for the payment of money by the buyer to the agent. The seller is obliged to inform the buyer that their interaction is factoring that such an event involves the interaction of the second person with the Bank.

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So, the supplier is required to present documents in a banking institution, who must confirm the actual supply of goods or services with a condition of installment payment. And in that day the seller receives 70% of the contract value. The amount of the percentage depends on the category of reliability by which the buyer will be assigned by the Bank. The higher it is, the greater the amount of the provider will receive.factoring calculation

When is the payment deadline, the buyer is obliged to transfer money directly to the Bank. In the case of non-payment within the established deadlines begins to operate such mechanisms as factoring. What is the impact of the Bank implies, will be discussed further. The Bank conducts a number of actions aimed at recovery of funds from the debtor. Upon successful repayment, the Bank paid the vendor the balance of the contract price minus commissions (about 3%), levied as a fee for such services.

In summary, it should be noted that the company-supplier, using factoring, you receive the opportunity to realize their goods with a delay (which is essential for the buyer). However, if the seller withdraws from circulation a significant part of the funds.


Article in other languages:

BE: https://www.tostpost.com/be/nav-ny-gramadstva/1279-faktoryng-shto-takoe-yak-efekty-na-vykarysto-vac-yago.html

DE: https://www.tostpost.com/de/news-und-gesellschaft/1276-factoring-was-ist-das-und-wie-man-es-effektiv-zu-nutzen.html

ES: https://www.tostpost.com/es/noticias-y-sociedad/1281-factoring-qu-es-y-c-mo-utilizar-eficazmente-el.html

KK: https://www.tostpost.com/kk/zha-aly-tar-o-am/1279-faktoring-degen-ne-zh-ne-ony-alay-ti-md-paydalanu.html

PL: https://www.tostpost.com/pl/aktualno-ci-i-spo-ecze-stwo/1282-faktoring-co-to-jest-i-jak-go-skutecznie-u-y.html

PT: https://www.tostpost.com/pt/not-cias-e-sociedade/1279-factoring-o-que-e-como-usar-eficazmente.html

TR: https://www.tostpost.com/tr/haber-ve-toplum/1285-faktoring-nedir-ve-nas-l-etkili-bir-ekilde-kullanmak.html

UK: https://www.tostpost.com/uk/novini-ta-susp-l-stvo/1281-faktoring-scho-take-yak-yogo-efektivno-vikoristovuvati.html






Alin Trodden - author of the article, editor
"Hi, I'm Alin Trodden. I write texts, read books, and look for impressions. And I'm not bad at telling you about it. I am always happy to participate in interesting projects."

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