What is factoring?
Factoring is a financial product in which financing, guarantee or collection services are provided upon transfer of current or future invoice-based receivables of firms, arising from their sales of goods and services, to factoring companies. Firms can benefit from factoring in both their domestic and overseas purchase and sales transactions.
Factoring transaction is mainly based on:
- Transfer of invoice-based receivables to factoring companies;
- Follow-up and collection of such receivables by factoring companies;
- Undertaking of the risk of non-payment of such receivables, depending on the type of service provided;
- Keeping of records related to such receivables,
- And advance payment of a certain ratio against such receivables assigned.
