Great Opportunities for the Right Factoring

When you have a company you need to have an efficient management of finances, so you can keep the numbers in order, however it is very common that at the end of the month it is not possible to have all the money necessary to pay suppliers, customers, or even to buy materials, and for this the best solution is to opt for factoring.

The factoring is a way to achieve liquidity immediate money accounts that are receivable as checks, drafts, bills or notes which allows effective transformation. From Alliance One this is important.

Now, this works through a financial institution that is the one that buys accounts receivable from the company that contracts it, in addition to that, it is responsible for the subsequent collection of the same. All this is done thanks to the collection of an extra commission for having provided the money at the time the company needed it.

Main requirements

But now you will be wondering how to access this, well keep reading that we will tell you next.First of all, you should know that there are three participants in this process: the factor that provides the factoring services, the client that transfers the accounts receivable to the aforementioned, and finally the debtor of the transferred documents.

The factoring company

Then you will be asked for a series of requirements to be able to access factoring, which are divided into: legal background, business background, and financial background.

There are also other requirements that vary depending on each company that hires its services, such as:

  • Your sales to the credit must be of an amount convenient to the factor to carry out the operation.
  • They cannot have specialized services in collection and administration of the client portfolio, especially if they focus on the production of goods or services.
  • They cannot have uncollectible debtors, nor can they belong to a speculative business that has large variations in their prices.

It is important to mention that an invoice cannot be discounted in two or more factoring companies, as well as the financial institution will only deal with the invoices that it considers appropriate.

If César had signed a factoring service without recourse but with notification, the car brand would be aware of the contract between the transferor and the factor and, therefore, after the remaining two months to make the payment of the invoice should enter the total amount owed directly to the bank. In the factoring with notification, the money of the debtor does not pass through the hands of the transferor; something that does happen in the case of factoring without notification – the debtor pays the transferor and the transferor is the one who pays the debt with the financial institution.

In a factoring without recourse but with notification, when César receives the 14,000 euros that the car brand owes, he must pay the amount in full to the bank. When dealing with factoring without recourse, even if the automobile brand did not pay the bank the 14,000 euros owed, the entity could not claim from César the amount that advanced it.

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