Factoring

Factoring is a contractual relationship in which a bank transfers or undertakes to transfer money to a customer/seller in exchange for the customer’s monetary claim on a third party (the buyer) in connection with the sale of goods, the performance of works or the provision of services, and the customer/seller assigns or undertakes to assign to the bank the bank’s monetary claim on the buyer (conditional assignment of the claim), and to pay the remuneration set out in the contract.

• Fast receipt of funds by granting deferred payment terms to domestic and foreign buyers of company products.
• When working capital is needed.
• To be competitive in the market: the buyer is allowed to extend the grace period and the money is available immediately.
• Where a simplified administration process for the collection of funds from customers is relevant when an invoice is due for payment.

• The term of the factoring agreement is not more than 12 months (may be extended by agreement between the parties);
• The factoring advance is on average 80-90% of the VAT invoice amount;
• The maximum payment term is up to 90 days (longer by agreement between the parties).

Factoring allows a company to receive funds immediately for issued but unpaid invoices where customers have been granted deferred payment terms. This helps avoid tying up working capital, improving cash flow and providing quicker access to funds for day-to-day business operations.