Smart Development with Factoring Now

Factoring is a service for the assignment of receivables for or without financing, with one of the following objectives: management and accounting of receivables, collection of receivables and risk coverage. Assignment of receivables only if there are at least two of the above elements is classified as factoring. Now if you want to know what is factoring then the following details are for you.

Who are the main customers for this type of product?

In most cases, customers by factoring are trading companies related to the small and medium business sector, i.e. companies that most often do not have a large collateral base and, accordingly, do not have the opportunity to obtain significant credit resources from the Banks to finance a growing business, but who possess an asset as interesting to the Factors as accounts receivable, especially if the debt relates to debtors – large networks or large manufacturing companies. By selling such debt to the Factor, companies receive the necessary amount of factoring financing that is unsecured.

What are 5 reasons why, in your opinion, you need to use factoring?

  • obtaining financing without collateral
  • The volume of financing most often reflects the financial state and level of solvency of the client company itself, and its debtors – most often large networks and manufacturing companies, i.e. In the overwhelming majority of cases, the Factor finances all customer accounts receivable – “sold more goods, got more financing from the Factor” – ideal conditions for increasing sales volumes for the client.
  • The client by factoring protects itself from liquidity risks (ie, the risk of delinquency on the part of the debtor), because The factor usually gives a grace period after the end of the grace period, and with a non-recurring factoring scheme also against credit risks (that is, the risk of non-payment by the debtor).
  • The client in factoring in addition to the usual financing receives such a service as management of accounts receivable.
  • By selling its receivables, the client improves the balance sheet structure and balance sheet of its company.

Are there any tax benefits when using this service? How does taxation take place?

Tax credits are not provided for factoring. In addition, all factoring services under Russian law are subject to VAT. However, this VAT paid in reward to the Factor, the Customer can take to a deduction without problems.

What kinds of factoring exist and in what situations do you need to use this or that scheme?

 

There are 2 classical factoring schemes around which all existing types of factoring are built: factoring with the right of recourse and factoring without the right of recourse. Under the regression is understood the client’s guarantee to the Factor for the performance by the debtor of its obligations to pay for the goods.

 

 

 

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