Under a factoring agreement you transfer all or a large proportion of your trade receivables to an external partner. Depending on the provisions in the agreement, the receivables are purchased in their entirety or the factoring company just takes over the debt management system. Factoring may also be combined with credit insurance, thus directly covering your customer risk.
Smart financial management
A factoring agreement can offer your company the necessary financial breathing room:
- Granting an easier payment extension – Trade receivables are a key component of your company's asset side. Outsourcing your credit management enables you to focus on your company's growth.
- Less risk of defaulters – The risk of defaulters can be borne by the complementary credit insurance.
- Invoice advance – As you have an advance equal to 75%-85% of the invoice issued, you are able to do business at a faster pace.