Fine Opportunities for the Best Factoring Companies

The payment morale has fallen significantly in recent years, not only in here, but worldwide. Many companies have to wait longer and longer for the bills to be paid. This leads to immense problems for the enterprises, because they are compelled thereby to compensate for the loss of receivables by own financial means, but must finance at the same time the running enterprise. Not infrequently, the companies then get themselves into a certain imbalance due to the payment default or the clearly delayed payments. Getting the factor companies to get the support is possible now.

Surely you have had dealings with clients who are unwilling and unable to pay, and know what problems are causing late or outdated payments. Just the additional administrative effort to collect the receivables poses major problems for many companies. One solution to this problem is factoring. It was originally developed in the USA, but arrived in the 1950s to Europe and thus to Germany.

What is factoring?

  • Expiration of factoring
  • Factoring costs
  • Advantages factoring
  • Functions of factoring
  • Forms of factoring

What exactly is factoring?

The widespread opinion about factoring is that this is a lending business. That’s not true. You act as a factoring customer, often referred to as a follow-up customer or cedant. The claims that you have towards your customers, which are also referred to as debtors, debtors or third party debtors in factoring, you sell to a factoring company, the assignee or factor.

This company then drives all the claims for you, paying you the receivables with the purchase. A percentage is deducted which remains for the factor as earnings. It is therefore actually a factoring purchase transaction   and not just the classic lending business.

Expiration of factoring

Of course, in order for your factoring to make sense for your business, you need to know the exact process of this business. Here it comes first to the contract between you and the factoring company. You can decide whether you want to sell all receivables to the factor or only the demands on a specific customer group. As a rule, only receivables for the factoring are used, which arise after the conclusion of the contract, however, you can sell already existing demands by clever negotiation. The contract is purchased in practice for at least two years, but often over four to five years.


Process factoring

The factoring company conducts a credit check on your customers, before the contract is concluded, but also during the term of the contract. On the basis of this creditcheck, it sets limits up to which it bears the risk of default. The better the creditworthiness of your customers, the higher the payouts of the factoring company to you.

Your receivables are purchased by sending your invoices to customers to the factoring company. This now checks the bills for accuracy and then buys the claims. The purchase price will be paid to you immediately after the agreement or after a certain period.

Last word

Customers whose credit rating has not yet been checked by the factor must first be checked before the purchase price is paid. The purchase price is initially reduced by ten to 20 percent. This is also called the security deposit. Factoring companies retain these in order to compensate for discounts, discounts, discounts or complaints on the part of their customers. Once the customer’s money has been received, this difference will be paid to you.

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