What is Factoring?
Factoring is a financing method in which three different services; guarantee, receivables management and financing are offered to the seller company by assigning the forward receivables arising or to arise from these sales of the companies that sell goods or services with invoices and checks. Factoring transaction, trade debtors, factoring company, and between commercial enterprises engaged in the sale of goods or services.
In simpler terms, factoring provides fast cash flow to your business and supports a sustainable balance sheet structure. With factoring, you can turn your sales into cash and realize a healthier growth of your business.
Who Are the Parties to the Factoring Transaction?
- Factor: It is the financial institution that takes over the receivables by way of assignment.
- Seller Firm: It is the firm that becomes a creditor by selling goods or services.
- Borrower Firm: It is the firm that becomes indebted by purchasing goods or services.
What are the Advantages of Factoring?
- The opportunity to be funded with your own resources without the need for external resources,
- Optimizing your working capital,
- Regardless of the size of your business, it turns your receivables into cash in a short time,
- It provides the opportunity to keep your balance sheet structure, which is affected by seasonal changes, liquid,
- Time and expense savings are achieved by providing follow-up and collection services by the factoring company,
- It is ensured that the costs to be incurred by purchasing the raw material in advance are reduced. Thus, production efficiency and profitability increase,
- By having up-to-date and reliable intelligence information about its strength and credibility, you will reduce your collection risk and obtain a quality customer portfolio.
- By having up-to-date and reliable intelligence information about the buyer's financial strength and credibility, you will reduce your collection risk and obtain a quality customer portfolio.
- Time is paramount. With factoring services, you can ensure that your business is always on track without waiting for maturity. Customer reliability research, collection follow-up and all procedures related to loans are provided by the factoring company. By saving time, you can make future business plans and gain an advantage over your competitors.
- Businesses can expand their markets by transferring the buyer risk to the factor in the foreign market,
- It provides comprehensive security against payment defaults in export transactions.
- The communication problem that may occur between the buyer and the seller is eliminated. Problems that may arise are resolved by the factor in their own country with the language of the country where the buyer and seller are located.
How is factoring done?
In domestic factoring, the seller company that wishes to benefit from the factoring service transfers its invoiced receivables arising from or will arise from its goods and services to the factoring company. The factoring company makes its offer to the seller after carrying out the necessary examinations. In this offer, it specifies the services it will provide, the commission it will receive, and the fees.
After the factoring contract is signed between the factoring company and the vendor, the vendor sends a copy of the documents promoting its receivables to the factoring company. The factoring firm makes a prepayment to the seller firm. When the due date in the contract comes, the invoice amount is collected from the buyer and the remaining payment is made to the seller.
All companies that do domestic or international invoice trading can benefit from our factoring service without any balance sheet size or turnover criteria. All businesses that want to expand their business and create sustainable cash flow can reach us through our digital channels and branch network.