Factoring is a set of services provided by the bank to companies that operate on a deferred payment basis. From the company's point of view, factoring is the assignment of receivables claims.
Types of factoring
Factoring is becoming more and more popular among entrepreneurs. The advantages are obvious for all participants in the factoring market - the seller receives additional working capital, the buyer receives a deferred payment, the bank receives a commission and provides funds. Factoring is regulated in 43 Art. Civil Code of the Russian Federation "financing against the assignment of a monetary claim".
The cost of confidential factoring services is higher than the cost of open factoring services, because the risks of the factoring company in this case are higher.
Factoring is in great demand among young dynamic companies that are experiencing a shortage of working capital.
The factoring company credits the client's working capital and handles the receivables in exchange for a commission. Most often, it is banks that act as an agent, but according to the law, these can be other credit and commercial organizations that have the necessary license. Document flow in factoring is rather simplified - each next amount of financing is paid upon submission of shipping documents to the bank. Sometimes factoring companies can take on not only credit functions, but sales, advertising, accounting, so that the client can focus exclusively on production.
There are several types of factoring:
- open (conventional) factoring - in this case, the seller notifies the buyer about the assignment of documents to a factoring company (invoices, invoices, etc.), the buyer transfers money under an agreement directly to the factoring company;
- closed (confidential) factoring is distinguished by the fact that the buyer does not know about the assignment of the rights to claim his debt to the factoring company;
- factoring with the right of recourse assumes that the factoring company can demand from the creditor to reimburse it the debt if the borrower refuses to pay. In practice, non-recourse agreements are extremely rare.
Closed factoring implementation scheme
Closed factoring is implemented according to the following algorithm:
- the supplier ships the goods on a deferred payment basis;
- the factoring company receives from the supplier documents confirming the shipment of goods (invoices, invoices, acts, etc.);
- the factoring company pays off the buyer's debt in the amount of up to 90% and gets the right to demand that the buyer's debt be repaid in its favor;
- at the end of the contract, the buyer pays off the debt to the seller, and he transfers it to the bank;
- the factoring company returns the remaining 10% of the transaction minus the cost of the closed factoring service;
If the supplier is faced with an unscrupulous buyer who does not fulfill his obligations, then he is still obliged to pay the entire amount to the factoring company.
Benefits of Closed Factoring
Why entrepreneurs use closed factoring services. The main reason is that the company can significantly expand its customer base through attractive shipping conditions. Losses from such a scheme are only equal to the amount of interest that he pays to the bank for factoring services.
Closed factoring does not contradict the law - Art. 382 of the Civil Code of the Russian Federation states that "for the transfer of the creditor's rights to another person, the consent of the debtor is not required, unless otherwise provided by law or agreement."
Closed factoring provides an opportunity to credit debt and provide a deferred payment. At the same time, it allows you to ignore the buyer's prohibition to work with a factoring company.
This type of lending allows you to replenish working capital without collateral, debt is the cover of obligations.
