What is involved in factoring?
Factoring is a versatile financing service increasingly used by companies in manufacturing, wholesale, and the service sector. The three essential pillars of factoring are:
- Liquidity: Financing that corresponds to your sales.
- Security: Protection against bad debts.
- Service: Accounts receivable management.
How does factoring work?
Eurofactor purchases your receivables under the terms of a factoring contract.
- We assess the credit-worthiness of your debtors before signing the contract and on a continuous basis afterwards, and assume the full risk for bad debts within an agreed limit.
- Under disclosed factoring, you inform your debtors about the sale of the receivables. Under closed factoring, your debtor "officially" continues to remit payments for invoices to you - we remain silently in the background as the factor.
- After signing the contract, you continuously make invoice copies available to Eurofactor or submit invoice data in electronic form. We purchase the receivables to the extent that they are within the established debtor limits.
- Eurofactor credits the factoring proceeds (receivables purchase price) to your account right away. We only retain 10 to 20 percent of the purchase price as security for possible invoice deductions (e.g. early payment discounts). This retention is paid out to you when your debtor pays, or in case of bad debts, no later than 120 days after the due date.