Port communicationComparison of commercial factoring services
Advantages
Analysis (1) The advantages of factoring business compared with other financing methods
Advantages
Compared with other financing methods, factoring business has certain advantages.
Advantages
。Factoring is similar to a type of asset-based lending。In traditional lending relationships in mature financial markets，Lenders generally view collateral as a secondary source of repayment，The borrower and its operating efficiency are considered the first source of repayment。
Traditional loans focus on the borrower’s own credit，rather than the value of the borrower's assets。Even traditional loans are collateralized by the borrower’s accounts receivable，But the loan is generally not clearly linked to the value of the mortgaged asset.。The key to the issuance of asset-backed loans lies in the value of the mortgaged assets (such as accounts receivable).、inventory, etc.)，Not directly related to the borrower's own credit and operating efficiency。Factoring is also different from general asset-backed loans。
in factoring business，The factor purchases the receivables (usually at a discount)，Ownership and risk of the receivables are accordingly transferred to the factor，does not constitute a liability of the borrower。in business law、In a financial system with relatively weak bankruptcy protection，The importance of factoring business has become more prominent。Because the accounts receivable purchased by the factor do not constitute the assets to be liquidated of the bankrupt SME，and become the assets of the factor，This protects the interests of the factors。
in a factoring relationship，Financing is based on the quality of accounts receivable，rather than the borrower’s own credit status。therefore，Factoring is particularly attractive to small and medium-sized enterprises with higher credit risks。In a business environment with imperfect information infrastructure，Factoring can alleviate the problem of borrower information opacity。
If the debtor information of the receivable is complete (for example, the receivable comes from a large company or a foreign company with good credit)，Factors can develop their own database of accounts receivable repayments，To more accurately assess credit risk and resolve information asymmetries in financing。 (2) Benefits of factoring business to small and medium-sized enterprises: First, it is beneficial to the seller’s capital turnover。
through factoring，The seller transfers the receivables to the factor，Funds can be withdrawn quickly，to pay workers’ wages、Purchase raw materials, etc.，Continue production for the next batch of orders。at the same time，Factoring is just a simple asset sales business。in factoring business，A factor buys a business's accounts receivable，rather than using accounts receivable as collateral for loans。therefore，Different from general asset-backed loan business，Factoring will not increase the company’s liabilities。
Second, the procedure for obtaining financing is simple。After the buyer and seller sign a trade contract，The seller fills out a factoring application form，Apply for financing from a factor。After analyzing the credit status of the buyer (debtor), the factor，Determine preliminary financing amount、Interest rates and factoring
cost
。After the seller delivers the goods，Transfer invoices representing accounts receivable to the factor，Factoring deducts financing interest and factoring
cost
Then provide financing to the seller (usually 80-90% of the invoice amount)。
so，The seller eliminates potential credit risk，That is, the risk that the buyer cannot pay according to the contract after delivery.，At the same time, the risk of the debtor's default is transferred to the factoring company.。The third is to enjoy the comprehensive services provided by factoring companies。in factoring business，In addition to providing financing facilities to sellers, factors，Buyer credit investigation will also be provided、Manage accounts receivable、Collection of accounts receivable、judicial services、Analysis of international markets and a series of comprehensive services。
so，Sellers can focus on expanding production and sales，Enhanced security，Conducive to expanding international markets，increase its operating income。Especially for small and medium-sized enterprises，It is too costly to establish a separate accounts receivable management department，Factorers manage large amounts of accounts receivable，Can achieve economies of scale。Fourth, it is conducive to cost saving。Sometimes sellers want to get their funds back as quickly as possible，Discounts are usually given to buyers for immediate payment or large orders。
Use factoring，The seller can promptly recover the funds after shipment，Therefore, such discounts may no longer be offered to buyers，This part of the savings is equivalent to compensating the cost of factoring business。also，For small and medium enterprises，Using factoring business saves more manpower and material costs than establishing a dedicated monitoring and management accounts receivable department.。
Small and medium-sized enterprises due to imperfect credit records、no collateral、Lack of expertise and resources to manage its loan and receivable operations，There is a higher risk in the loan、The problem of information opacity，Therefore, it is more suitable for factoring financing.。Because factoring is based on the borrower’s receivable risk，rather than the borrower’s own credit risk，in particular，When the receivable is from a large or foreign reputable company，The risk is much lower than that of ordinary loans。
However, factoring can only be used at specific stages of development of small and medium-sized enterprises.，Once a company has gained sufficient operating experience、Perfect credit record and high-quality mature products，Companies may seek other financing channels and methods。
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