Factoring services: what should clients know?

Factoring refers to unsecured financing secured by the right to collect funds. This means that the factor (a financial company or bank providing factoring services) purchases debt instruments, thereby acquiring the right to claim the debt. It should be noted that this type of financing is used by some companies that purchase goods or services on credit, with the factor paying for them.

Factoring: key points

There are several types of factoring, the main difference between them being the degree of risk. Under one form of factoring, a debt can be purchased with or without notifying the debtor. If the factoring company covers the debtor’s debt, there are two options in the event of non-repayment: loss of the amount paid or repayment of the debt by the creditor company.

There are forms of factoring that deal with the purchase of existing debt obligations, and there are those that acquire future debts from creditors. Factoring services can also be provided within a single country or across different countries, where the debtor is a resident of another state.

Key aspects of providing factoring services:

• no collateral required, i.e. no security is required for factoring financing;
• acceleration of cash flow;
• no restrictions on the amount of financing;
• the debt is settled using funds received from the debtor;
• a guarantee is required for contractual financing of the purchase of services or goods.

If you are facing credit debt issues that you cannot resolve on your own, please contact Svarog. Our many years of experience in the factoring services market will help you overcome any difficulties!