Factoring is an operation of cession of credit, on which a company (the client) it yields the  collection rights of a bill to a factoring company, this one in exchange will do it an anticipation of this amount. In addition the factoring company will carry a commission or interest for this advance.

Factoring is a financing instrument or financial product to short term lead to all types of companies, but in special to those  that they sell his products on credit to his buyers.

In addition, the factoring offers additional services of management, administration and guarantee in case that debtors do not pay, so they are insolvent.

There are 3 parts that participated in a factoring operation:

1.Client: is the company that issues a trade credit.

2.Debtor: is the part that obligated to pay the trade credit.

3.The factoring company.

There are four principal types of factoring:

1.Recourse factoring: The client company respond to the debtor insolvency.

2. Factoring without recourse: the factoring company respond to the debtor insolvency.

3.Factoring with notification: The factoring company notify all debtors that now it is going to be the titular of the credit rights. After that, debtors must pay the credit to the factoring company.

4.Factoring without notification: the factoring company does not notify debtors about the cession. Because of that, they are going to pay to the client company and it company must pay that money to the factoring company.


What is factoring?

What is factoring?