Factoring services have existed in Russia since 1988 and were a set of services provided by the bank for suppliers and buyers. Today factoring is a priority line of business for banks and companies acting as a financial agent.
Instructions
Step 1
General concept Factoring is a set of services for the provision of deferred payment in trading activities. Based on the conditions of factoring, the supplier delivers the goods to the buyer, and receives payment from a third party - a factor (bank or factoring company). In turn, the buyer is the creditor of the funds that his financial agent paid for him. This service takes place when the buyer cannot pay for the delivery of the goods on time, and the supplier needs an immediate transfer of funds to his account.
Step 2
Term The factoring company credits suppliers, thereby redeeming the buyers' receivables. The grace period for payment should not exceed 180 days.
Step 3
Contract The supplier of the goods enters into an agreement with the factoring company, under the terms of which the factoring company, if necessary, may require the provision of an invoice and other documents for payment for the delivered goods. After receiving the documents, the factoring company re-estimates the cost of the loan, taking into account inflation, discounting the documents, and pays the supplier from 60 to 90% of the amount of claims upon shipment.
Step 4
Payment As soon as the buyer transfers the funds to the account of the factoring company, it pays the remaining amount to the supplier, deducting from it the interest on the loan provided, the commission for the provision of factoring services and a small percentage for processing the documentation. This may also include a commercial risk insurance commission.