What is factoring? The principle is relatively simple: a financing institution, called a “factor”, collects a company’s unpaid customer invoices and advances payment . Depending on the negotiated conditions, the factor can take charge of the entire administrative invoicing process: monitoring of receivables, reminder letter, collections, unpaid debts, etc. Note that from a legal point of view, the invoices transmitted no longer belong to the issuing company, but to the factor.
In fact, by assuming the risk of collecting invoices, ownership of the latter is transferred to it.
Who is factoring for? All businesses can benefit from it. The size, sector of activity and status of the structure do not theoretically come into play in the eligibility criteria. Thus, a self-employed person or a small business can use this type of financing in the same way as a large company. The only prerequisites for setting up a factoring contract are Telegram Data as follows: Invoices must only be sent to professional customers (in the private or public sector). The company cannot use factoring if the customers invoiced are individuals. Indeed, the risk of non-payment and insolvency is greater in B2C. Payment deadlines must be granted to billed customers. Invoices due upon receipt cannot be transferred to a factor. Of course, each factor can have its own eligibility criteria.
Setting up the factoring contract The factoring company studies the file and the situation of the company that made a request
A factoring contract is then signed between the parties with conditions for the assignment of customer invoices. This is called debt mobilization . The contract determines: the transfer of ownership of receivables to the factor for selected invoices and customers. The remuneration conditions of the factor (commission) the amount of the guarantee UMM Data fund . Calculated on the risk incurred depending on the situation of the company or sector of activity. the terms of the “performance guarantee” given by the factor to the member company. How to organize the management of factoring in your company? Firstly, of course. The company must target and isolate the unpaid invoices that it wishes to transmit. It is generally possible to easily extract them from an online invoicing tool .