Factoring

Factoring is the operation of repurchasing debt recovery rights. It is also defined as activity of specialized agencies to recover money from their clients' debtors (industrial or commercial companies) and manage its debt requirements.

Ability to obtain money for unpaid claims and invoices from not the taxpayer, but from a specialized financial company is particularly important for liquidity maintenance.  

Conducting business operations in case of granting deferred payment for companies-buyers of your products or services will inevitably raise the question of risk, which is an integral part of any credit transaction. This risk is associated not only with deferred payment, but also with non-payment for goods at all. Therefore, it is necessary to pay attention to compliance with the terms of payments. The activity of specialized intermediaries (factoring) companies is aimed at solving the question of reducing risks and optimizing the timing of payments in the suppliers-buyers relations, providing greater stability in this relations. 

To find out more, please contact us: (044) 591-52-53 

Factoring scheme is quite simple. The supplier ships the goods to the buyer for a deferred payment. Invoices are sent to the factoring company, which, in its turn, pays the company's invoices for shipped goods from 50% to 90% of the buyer's debt (this amount depends on the agreement, the duration of the payment deferment, risks associated with the client's work, and number of shipped product). Later, the buyer transfers funds to a factoring company's account in the amount of supplied goods price under the condition of the deferred payment. Then the factoring company transfers the remaining funds to the supplier. 

In factoring transactions three parties are involved: 

1. factoring (intermediary) company – a specialized organization that buys invoices from their customers; 
2. customer (supplier of goods, the creditor) - an industrial or a trade company, that has signed an agreement with factoring (intermediary) company; 
3. company (borrower) - which is the company purchasing goods. 

If the company becomes a client of a factoring company, it sends all invoices presented to the customers to the factor-firm. For each document the client must obtain the payment approval (similar to the acceptance of claims). The factoring company examines all the invoices and defines out the buyers' solvency. The most important service in factoring is a guarantee of payment to the client.

This warranty covers the full range of domestic and international operations: the factoring company is obliged to pay all the client's invoices acceptances even if debtors are insolvent. 

The main advantages of factoring are: 

• the factor-firm does not require the client to provide support, «the key» is the right of claiming payment for shipped goods, and the main and current assets remain in the disposal of the enterprise; 
• funding depends on the capabilities of the company and is only restricted by its sales volumes; 
• funding does not increase the customer's debt and the amount of debts receivables, on the contrary, decreases; 
• if the factoring agreement is signed, money can be given within a short period of time after receiving the application. For this purpose (in case of the prior agreement) it is sufficient to give the factor-firm the documents proving the delivery. 

Having established contacts in the banking sector, focusing on the list of special factors, firms with long experience in working with similar instruments of attracting the necessary funding to small and medium businesses, the Pro-Consulting company offers its services to attract factoring companies to purchase invoices, presented by your company, to manage its debt requirements. 

To find out more, please contact us: info@pro-consulting.ua; finconsult@pro-consulting.ua