Smartest Supports for the Effective Business of Novices

The factoring scheme, the more expensive non-recurring scheme, is most often interesting to customers who are not sure about the solvency of their debtors and who want to transfer these risks to Factor, and, of course, ready to pay for it. With such a factoring scheme, the customer only needs to deliver the goods to the debtor and receive a mark from him about its acceptance, the debtor will pay or not pay – these are the problems of the Factor.

What documents need to be provided to the client in order to use this service?

From the client it is required to provide all its statutory and legal documents, accounting records for several past reporting periods, fill out the Questionnaire for your company and for the Questionnaire for each customer whom the client wants to transfer to factoring, and provide copies of supply contracts with these debtors. The factor companies are very serious about this.

What actions should be taken?

If the transaction is approved, the client enters into a Factoring Agreement with the Factor (the Financing Contract for Assignment of Cash Claims), and then notifies the letter of its debtors that they pay the deliveries not to the client’s settlement account, but directly to the Factor, to a special factoring account. After the receipt by the Factor of such letter certified by the debtor, the Factor carries out financing of the client against granting to it the client of the goods-shipping documentation (invoices and waybills) on deliveries to the given debtor.

How and by what means does the risk related to accounts receivable decrease?

There are 2 main types of risks associated with accounts receivable: liquidity risk (the risk of late payment by the debtor), and credit risk (the risk of default on the part of the debtor). With a recourse factoring scheme, the client shifts only the liquidity risk to Factor. And already the Factor in case of delay is trying to find out the reasons for the delay in payment and is trying to get the money from the debtor. In the event that these actions did not lead to success within 30-45 days, Factor has the right to ask the client to return the financing. With no regression scheme, both these kinds of risks are shifted completely to the Factor, and the Factor has to be managed by them themselves.

Credit risk

The factor usually controls the method of detailed assessment of the financial condition of the debtor, i.e.

The volume of factoring transactions in your branch?

The factoring market, at the moment, is one of the fastest growing. Growth rates over the past few years have amounted to about 100% per year. There is every reason to believe that in 2008 this trend will continue. However, the growth is likely to occur to a greater extent at the expense of regions, in the market is already close to saturation. This is largely reflected in the orientation of many Factors exclusively to regions where there are more prospects for development, and you can get a higher margin.

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