Traditional Culture Encyclopedia - Traditional customs - What is Factoring_Factoring Meaning

What is Factoring_Factoring Meaning

Factoring, as a relatively new means of international trade settlement, has a history of more than a decade and is gradually maturing and being adopted by more exporters. So how much do you know about factoring? The following is organized by me on what is factoring content, I hope you like!

What is factoring

Factoring (Factoring) full name of the factoring agent, also known as collection and payment, the seller will be based on its present or future sales of goods with the buyer / service contracts resulting from the transfer of accounts receivable to the factor (financial institutions to provide factoring services) by the factoring business to provide them with financing, financing and service contracts. Factoring is a comprehensive financial service that provides a series of services such as fund financing, buyer credit assessment, sales account management, credit risk guarantee and account collection. It is a practice of entrusting a third party (factor) to manage accounts receivable in order to strengthen the management of accounts receivable and enhance the liquidity of the seller in order to settle the payment of goods in the form of collection and credit in commercial trade.

New definition of factoring, also known as insurance processing, claims.

Classification of Factoring

Factoring is divided into International Factoring and Domestic Factoring, of which Domestic Factoring is developed from International Factoring. International factoring is also called international payment factoring or paying agent. It is a comprehensive financial service business in which the factor provides exporters with credit insurance or bad debt guarantee, collection or management of accounts receivable, and at least two kinds of business in trade financing through the acquisition of claims, and the core content of which is the provision of export financing through the acquisition of claims. Unlike international factoring, the factor, factoring applicant and business contract buyer of domestic factoring are all domestic organizations.

Factoring Services

Factoring, also known as factoring agency, collection and payment, is a practice of requesting a third party (factor) to bear the risk in order to avoid the risk of collection by the exporter in order to avoid the risk of collection when settling loans on collection and credit in trade. Factoring is a comprehensive financial service integrating trade financing, commercial credit investigation, accounts receivable management and credit risk bearing. Compared with traditional settlement methods, the advantage of factoring mainly lies in the financing function. Factors provide at least two of the following services:

Trade financing

Factors can provide financing to the seller immediately upon receipt of the assigned accounts receivable according to the seller's financial needs, assisting the seller to solve the problem of liquidity shortage.

Sales Segregation Management

The factor can provide the seller with the recovery status of accounts receivable, overdue accounts, aging analysis, etc., and send all kinds of statements to assist the seller in sales management according to the seller's requirements.

Collection of accounts receivable

The factor has professionals engaged in collection, who will take reasonable, forceful and prudent means according to the overdue time of accounts receivable to assist the seller to recover the accounts safely.

Credit Risk Control and Bad Debt Guarantee

The factor can approve the credit limit for the buyer according to the seller's needs, and provide 100% bad debt guarantee for accounts receivable arising from shipments made by the seller within the credit limit.

Factoring Classification

Commercial factoring (commercial factoring)

Refers to factoring conducted by non-banking factor.

Domestic factoring

Refers to the factoring business provided by the factor for the buyer, seller in the domestic trade.

International factoring (international factoring)

refers to the factoring business provided by the factor for the buyer and seller in international trade.

Problems of Factoring

Factoring as a relatively new means of international trade settlement, has more than a decade of history, and is gradually mature, and is used by more exporters. It is mainly for the increasingly fierce competition in the market, the buyer's payment terms required more demanding, such as D / A forward, or even credit sales, in order to adapt to the exporter both to maintain the export needs, but also to reduce the risk of export collection of such a demand for a financial services products (like insurance is also called products). But to do factoring, there are conditions, that is, the need to pay attention to the following issues:

1, the buyer (importer) to have a good reputation or credit, so that the import factoring business can be approved for a certain amount of credit, otherwise it is unlikely to be accepted.

2, before the renewal of the factoring business, these applications, credit assessment, approved credit limit and a lot of work to be done in the formal signing of the export contract.

3, only when the export factor agrees to the exporter to do this factoring business, that is, the import factor for the importer to approve the credit limit, before the formal signing of the foreign trade contract or shipment of goods.

4. Pay attention to the use of the importer's credit line (balance status), as well as changes in its credit status. Maintain effective communication with the export factor at all times.

5, do not break through the authorized use of the credit limit.

6. If you need financing, you need to know the interest rate in advance.

  • Related articles

copyright 2024 Traditional Culture Encyclopedia All rights reserved