How Factoring works?
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There are always three parties involved in a factoring program:
Since the seller has a contract with BNP Paribas Factor, which includes the protection against insolvency of the buyers, he can use this to get more insights in the creditworthiness of his prospects. In practice he can make a request for a credit limit on a buyer as soon as he detects a business opportunity. The seller will know whether he is covered against insolvency or default of this buyer and to which extent, then the seller delivers the goods or service to the buyer and invoices him. After sending the invoice to the buyer the seller makes sure that BNP Paribas Factor also receives the invoice details. Upon receipt BNP Paribas Factor will generally finance up to 90/95% of the invoice value, with exceptions in some countries. As from due date on BNP Paribas will proceed to the dunning and collection of the invoice amount from the buyer. Finally, BNP Paribas Factor will reconcile the payments with the invoices and pay the balance to the seller.