The factoring ( factoring in English) is a technique of financing and debt recovery implementation by companies and of obtaining advance funding and outsource the management to a credit institution specialized: the factor or, in English, factor 1 .
Long regarded as the last resort of companies in financial difficulty, factoring is today a flexible tool at the service of companies. It is a process of outsourcing administrative tasks, insurance against delinquency and short-term financing.
Factoring can not manage claims on individuals: it only concerns business to business ( B2B ).
Factoring is a financial management operation or technique : a specialized credit institution (the facturer or, in English, factor ) assumes the recovery of a company’s debtsunder a contract. Factoring covers three services that can all be subscribed or not by the company:
- The recovery of receivables : the factor manages on behalf of its client registration bills , the revival of debtors in the event of late payment, receipts and ensures the legal department in case of non-payment. This is a debt assignment service.
- Cash financing : the factoring company advances the amount of the receivables as soon as they are presented by the customer. It is therefore a credit in the very short term, corresponding to the payment period granted to the debtor. There is no assignment of receivables and it is up to the customer to relaunch the debtor in the event of late payment. If the customer fails to obtain payment of the invoice on time, he will have to repay the cash advance to the facturer. The amount advanced is that of the receivable (or less according to the contracts and / or according to the factoring companies’ knowledge of the accounts receivable), after deduction of management fees (fixed and / or variable).
- The credit insurance : By delegation of the contract.
Compensation of the factoring company
The remuneration of the factoring company is of two types:
- The factoring commission remunerates the collection service and possibly credit insurance.
- Collected at each transaction (assignment of receivables) and based on a rate (fixed or variable) or a fixed price.
- The financing commission pays the cash advance
- Agios calculated on the balance of the customer account.
The factoring company blocks part of the amount of the assigned receivables to constitute a guarantee fund that makes it possible to deal with unpaid debts, litigation that has generated litigation, or to guard against a possible right of pre-emption (URSSAF for example). The amount blocked, proportional to the amount of receivables assigned, is returned upon expiry of the contract.
The role of the factoring broker
The broker is an intermediary between the factor and a company wishing to subscribe to a factoring contract. Its role is threefold:
- It allows the company to save considerable time in the choice of its factor. Indeed, each factor is specialized in a sector of activity, a typology of enterprise (in bonus or under collective procedure), even a size of enterprise.
- It allows the future member of the factoring contract to obtain optimal financial conditions thanks to its strong links with the factoring industry in France.
- He assists the company throughout the life of the factoring contract, which can sometimes be difficult especially in terms of invoice financing ratios.
Notes and references
- ↑ DEFINITION: AFFACTURING [ archive ] , on the site affactassur.