Discovering New Options for the Right Factoring

Exemplifying the above and to see more in detail how factoring works, we can give the case of a company that provides a service and for that reason issues an invoice for which it will opt for a payment of 3 million pesos. The invoice issued has a term of 60 days, which is inconvenient for the company. Now that Apex capital designates a personal account rep the options are there.

The Right Reason

For this reason, it uses a factoring contract through one of the many factoring entities available in the invoice market, and transfers its documents. In this way, the factoring entity in charge of the business becomes the new owner of the documents, so now it is up to the client to provide liquidity, without it being necessary for the client to wait a certain number of days to collect the invoices.

  • This is how the client proceeds to factor their invoices, and the factor in turn will immediately pay the client the amount of the invoice, although a small percentage will be deducted from the total for interest, operational expenses and notary expenses.

This makes the customer, instead of receiving 3 million pesos, receive only 90%, which in this case would be 2.7 million pesos (the percentage quoted is only an example, since this could vary depending on the factoring entity). With which the contract is made). For its part, the factor will proceed to collect the same when the 60 days are met, receiving 100% of the amount when appropriateand what happens if the debtor, for one reason or another, does not pay the bill? If the contract between the client and the factor is without recourse, the factor is fully responsible for the economic damage caused by non-payment.

The Contract

However, if the factoring contract contemplates an appeal, then the client will be responsible for the economic damage. One or the other factoring system involves different agreements, for which we must choose the most appropriate for the company.

  • Together with the previous ones, we find factoring confirming (Reverse Factoring). The confirming consists in speeding up the payment to suppliers thanks to the fact that the client requests the factor to carry out the advance payment of all the invoices coming from the suppliers of the contracting party.

The factor, in turn, streamlines the process of payments and removes that burden from the customer. As you can see, factoring and confirming are totally opposed, but the same factoring company can provide both services.

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