What is Factoring
Factoring is a financial product where the factoring company acquires a company’s time receivables arising from the sales of domestic and foreign goods and services and offers one or more of the financing, guarantee and collection services.
Why?
Factoring is a financing model capable of being implemented in any area that involves trading. Besides being a financing resource for companies, factoring system enables companies to secure their receivables, and thus, be relieved of an important burden, i.e., collection.
- ensures optimum resource utilisation and stock level,
- growth is financed through sales instead of foreign resources,
- offers companies time and human resources advantage at the time of collection of receivables. This gives the companies the chance to concentrate on marketing and sales activities.
- The business enterprise acquires the possibility of financing depending on the level of its current account, and gains access to liquidity against unbalanced flow of funds.
- The advantage of having easy access to funds through invoice assignment relieves the business enterprises of various detailed transactions sought by banks at the time of extending loans, and offers the chance to obtain funds quickly and at suitable cost.
- Since factoring provides cash input to the business enterprise through advance payment, it increases the enterprise’s competitive power compared to other enterprises.
