Factoring process is subdivided on opened and closed. The open factoring means that the buyer knows about participation in the factoring company transaction, and payment will be is produced into the account of this company. At the closed factoring the buyer on knows that the factoring company takes part in the transaction. Money funds will be transferred to account the seller, and the seller himself will list to their factoring company.
The factoring can be with the right of recourse and without the recourse right. The first kind of factoring means that if the buyer in fixed terms hasn’t extinguished indebtedness the factoring company can demand them from the seller. The second kind means that the factoring company itself should collect indebtedness from the buyer. The factoring without recourse is usual given only checked up and to safe customers.
Depending on a territorial accessory the factoring happens to be internal and external. At internal factoring all parties are residents. However if among participants of the transaction there are representatives of other countries such factoring is external. At external factoring the transaction can pass with participation of two factoring companies. One of them is engaged in financing of the seller (exporter), and another transfers money funds which arrive as payment from the buyer. At such transaction the basic credit risks lie down on the second factoring company.
The factoring is one of crediting versions. But unlike the ordinary credit it has a number of features. The factoring means financing of current activity, instead of investment as at the credit. At factoring the sum of proceeds of credit isn’t established in the agreement, and depends on actual requirements of the client. The factoring doesn’t demand obligatory granting of provision (pledge, the guarantee). And unlike the credit the indebtedness is repaid by the buyer, instead of the organization.
One of advantages of factoring before the credit is absence of necessity of transition in factoring company if in her face the bank acts. One more advantage is the minimum packet of documents (a waybill, the invoice).
It is possible to carry rather high overpayments to factoring lacks. As for granting of such services factoring companies levy the high commissions which can constitute 15 %-20 % from an outstanding amount. Besides, factoring companies daily charge percent which depend on the sum of preliminary payment.
By means of such credit tool as factoring, suppliers can be engaged in planning of the financial flows, increase in liquidity and turnover of indebtedness, insurance of the risks arising with a payment adjourning. The buyer doesn’t distract the circulating assets, and it influences results of its activity. The factoring gives the chance to suppliers and buyers constantly to develop the relations for an exit on the new markets and growths in volumes of sales. Therefore the factoring is rather popular in sphere of small and average business.
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