Factoring is a financing method used in both domestic and foreign trade, particularly for short-term sales of goods. In this system, factoring companies purchase the commercial receivables arising from businesses' credit sales, thereby accelerating their cash flow. Factoring involves three main parties: the customer requesting the service, the factoring company providing the service, and the buyer, who is the debtor.
Factoring services can be categorized into three main areas: Receivables Management, Collection Management, and Cash Management. These services can be used together or individually, depending on the financial needs of your business.
Receivables Management: The factoring company guarantees your receivables and assumes the risk of non-payment. This ensures that your receivables are tracked and managed by the factoring company, with all associated risks transferred to them.
Collection Management: The factoring company takes responsibility for tracking and collecting your receivables. For receivables under collection, financing services can be provided even before their maturity.
Cash Management: Factoring company advances a portion of your receivables immediately, providing instant cash to your business. This way, your term receivables are quickly liquidated, addressing your working capital needs.