Factoring 

Factoring is especially useful for SMEs that do not qualify for a traditional loan.

Factoring operations can be carried out by financial institutions or credit entities, such as banks, savings banks and building societies.

Advantages

• It saves time, saves money and means accurate reports can be obtained.
• It unblocks the portfolio of debtors and guarantees all debts will be collected.
• It simplifies the accounting as, under a factoring contract, the user has just one client who pays in cash.
• It clears the client portfolio.
• It makes it possible to receive advances on the loan granted.
• There is no indebtedness: the accounts receivable are purchased and there is no recourse in the event of non-payment.
• In the case of management, savings in the time spent supervising and directing how sales accounting is organized.
• It can be used as a source of finance and as way to obtain current resources.

Disadvantages

• High cost. Specifically, the interest applied is higher than the conventional commercial discount rate.

  The factor may decide not to accept some of the client's documents.

• Long-term transactions (over 180 days) or transactions related to perishable items are not included.
• The client is subject to the criteria of the factor when assessing the risk of the different purchasers.

More information

• National Association of Financial Credit Entities

  C/ Velazquez, 64-66 Planta 2

  28001 Madrid

  Tel.: 91 781 44 00

  Fax: 91 431 46 46

  e-mail: asnef@asnef.com