The activity of factoring can be considered as a system of charges for sales. In other words the business sells its accounts receivable (invoices) to a financial institution (called a Factor) at a discount. Thus, this financing system consists in taking the short-term credits. In a factoring transaction are obligatorily present three parties: the lender (Factor), the business as a supplier of goods or services (Member) and the customer (Debtor).
- Allow a reduction in average time of receipt
- Transfer of risk and responsibility to the Factor
- Reduction of administrative time regarding operations of credit control and collection of bills
- The Factor due to the continued failure of the customer can make a suspension of credit
- Factoring reserves the right to accept only some of the credits according to the selection criteria it uses for its evaluation.
- Case study about factoring – http://www.nibusinessinfo.co.uk/bdotg/action/detail?itemId=1075061117&r.l1=1073858790&r.s=cb&site=191&type=CASE%20STUDIES