If you compare with other financial products (e.g. bank loans) factoring is a markedly simpler financial service that provides not only working capital, but also management of receivables from customers and a reduced administrative burden for you. The supplier concludes a contract with the factor on the assignment of receivables and from then on regularly hands over invoices issued for approved customers to the factor.
Requests for factoring finance can be dealt with within one week (depending on the quality of the information provided);
70 – 90 % of the nominal value of a receivable (pre-financing) is paid by the factoring company immediately after the contract is concluded, but within no more than 2 days.
Funds Not Tied Up
Money provided by a factoring company can, in contrast to a loan, be used for any financial operations, whether it is the payment of liabilities, purchase of inventories, financing of investments or payment of dividends and salaries.
No Further Guarantees
In the majority of cases, to obtain funds by factoring it is not necessary to provide any other complicated collateral or security.
No Lending of Funds
In contrast to loans and credits, the client is not borrowing the money, but selling the receivables from its customers to the factoring company before they are due.
The factoring interest rate is about the same as rates for short-term bridging loans from banks for financing receivables that are not yet due.