What does a factoring company do?

one、An introduction to factoring business: Factoring means that the seller transfers its current or future receivables based on the goods sales/service contracts it enters with the buyer to the factor.，The factor provides financing to the seller、Buyer credit assessment、Sales account management、Credit risk guarantee、A comprehensive financial service approach that provides a series of services including collections。

Factoring business is based on the creditor transferring its receivables，Integrated account management、Receivables management and collection、Comprehensive financial services integrating bad debt guarantee and financing。The essence of commercial factoring is that suppliers based on commercial transactions，Convert the buyer's credit to your own credit to achieve financing of receivables。two、Classification of factoring business (1) According to whether there is recourse or not，It can be divided into factoring with recourse and factoring without recourse.。

Factoring with recourse (also known as repurchase factoring)，It refers to when the receivable cannot be collected from the debtor when it expires，Banks or factoring institutions can counter-assign receivables to creditors、

Require

Creditors repurchase receivables or return financing。Non-recourse factoring (also known as buyout factoring)，It refers to the receivables that cannot be paid off without commercial disputes and other circumstances.，The bank or factoring institution bears the bad debt risk of the receivables。

1. Whether the buyer is notified of the transfer of receivables，Can be divided into explicit factoring and implicit factoring。Explicit factoring means that the supplier signs a factoring business contract with the factor and transfers the creditor's rights to the factor.，Factoring business notified to the buyer at the time of transfer and confirmed by the buyer。Dark factoring is a type of export factoring business，It means that although the supplier signs a factoring business contract with the factoring company, it transfers its creditor's rights to the factoring company.，However, the factoring business does not immediately notify the debtor at the time of transfer.。

three、factoring business

Advantages

For suppliers，First, it can provide more competitive payment terms to corporate customers.，Maintaining good customer relationships，It can also ensure the timely withdrawal of funds.，Speed ​​up the circulation of funds，Increased corporate profits。Secondly，After the factoring business is launched, the factor can collect accounts and control credit risks.，Transferring risks to a certain extent to factoring。

also，Compared with the complexity of letter of credit transactions，The procedures for factoring business are relatively simple。Interesting articles in the financial circle、Module knowledge、Practical courses help you become a powerful person in the financial world! Welcome to pay attention to financial information! For purchasers，Because the factor provides suppliers with advance financing，Therefore, suppliers can give buyers more favorable payment terms，Conducive to business expansion of purchasers，increase in profits。

Four、The process of factoring business. Commercial factoring business mainly involves factoring companies.、seller、Three main entities of the buyer。first，There must be a contract between the buyer and the seller。After placing the order，The seller produces according to the order，Provide goods for credit sales after production is completed。Then it generates receivables and transfers them to the factoring company.，Factors can provide receivables financing to this business。

Then after expiration，The factor collects money from the buyer，After buyer pays，Pay to the account designated by the factor，After the factor deducts the principal and interest，Return the remaining balance to the seller。The internal operating process of a commercial factoring company is generally as follows:：Accept consultation—Business contact—Verify information—Assess buyers and account status—Internal review and approval—Sign factoring contracts—Lend loans—Supervise enterprises and account status—Account collection—Receipts。

five、Risks of factoring business

1. trading risk：Performance risks arising from the transaction process，The seller is unable to complete the contract，Buyer is unable to pay；
2. Industry risk：Credit risks arising from deterioration in buyer's solvency caused by industrial recession；
3. legal risks：trade contract、Defects in transfer of claims、Risks such as notice of transfer of claims；
4. moral hazard：customer fraud、Risks arising from employee moral flaws；
5. credit risk：Credit risk for sellers and buyers；
6. operational risk：Risks arising from the factor’s internal operations。

six、Factoring business risk control measures

1. Historical trade inspection，Cross-checking of multi-party documents，Reduce trading risk；
2. Industry access and buyer credit investigation，Reduce industrial risks；
3. Legal risk management is implemented throughout the entire business process，Eliminate legal risks；
4. to employees、tax、Industry and commerce、Comprehensive bank investigation，Eliminate moral hazard；
5. Conduct professional due diligence，Comprehensive credit review of buyers and sellers，Reduce credit risk；
6. Institutionalized management，Standardize operating procedures，Information management，Reduce operational risk。

seven、The future trend of commercial factoring relative to bank factoring，Commercial factoring is more flexible and innovative，Able to develop business varieties suitable for small and medium-sized enterprises，Meet Financing

Require

；Can focus on a certain industry or region，Based on an in-depth understanding of industry and regional characteristics，Provide targeted services；Helps to revitalize the current assets of small and medium-sized enterprises，Effectively alleviate working capital problems。Commercial factoring is one of the excellent financing and risk transfer channels for small and medium-sized enterprises in their rapid development stage..

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