What is Factoring?
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Factoring is the combination of three services based on the existence of a trade relation between a seller and a number of buyers:
These three services can be provided all together; in this case the factor cannot claim cash back from the seller in case of default of a buyer, hence we call it non-recourse factoring.
The three services can also be offered in various combinations, for instance, it’s possible to have flexible financing with protection against insolvency of the buyers or just flexible financing with credit management. In the latter case we talk about recourse factoring.
We can also offer stand-alone services like credit management outsourcing, meaning that the factor manages collection and credit administration for his clients. We sometimes also offer protection against insolvency on a standalone basis.
It is important to know that factoring is only applicable to business-to-business commercial transactions.