Factoring is the assignment (purchase before maturity) of accounts receivable from your customers to a factoring company. The factor then immediately pays you a portion of the value of the receivables so assigned (generally on the receivables’ assignment date, i.e. upon submission of invoices issued to your customers), usually 80% (advance). The amount of the advance paid may be up to 95%.
Following payment of the receivables by your customer to the account of the factoring company, the remainder of their value is paid, in this case 20%.
Factoring is a tool for financing through the maturity you grant to your customers.
Factoring offers a number of interesting options depending on your needs – see the left column for types of factoring financing.
For details about factoring, see Wikipedie here.
How will you benefit from factoring?
- You will grant your customers the maturity they request (up to 270 days) and gain a competitive advantage
- You may opt for dunning of overdue receivables and/or for credit insurance
- You will get well-prepared to face seasonal fluctuations of turnover and the receivables balance
- You finance your business by accelerating the cash flow
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