Great Time for the Proper Factoring Now Here

When choosing a suitable factoring provider, a company also has to decide which form of factoring should be used. Silent factoring is generally the best solution for most companies, as it brings a decisive advantage. In this blog post you will learn the most important information on breastfeeding factoring.

What is factoring?

Factoring is the sale of an outstanding receivable to a factoring provider (factor company).

Traditional factoring

With factoring, the liquidity situation in the company can be improved. There are numerous companies that actually have enough sales and yet often get into financial difficulties. These payment difficulties and associated liquidity bottlenecks are caused by the long waiting times (up to 180 days) that the company has to wait for the final customer to settle outstanding claims. The company is not liquid at this time – so these waiting times have a bad impact on the solvency of companies, especially SMEs. For this reason, alternative financing options such as silent factoring are often used. The essential opportunities for the proper best factoring companies are always there now.

What is silent factoring?

Silent factoring is a special form of factoring that is preferred by many companies to other types of factoring.

Silent factoring

Silent factoring brings with it a decisive advantage: the end customer (debtor) does not learn anything about the sale of the invoice (assignment of claims). The customer pays to an account of the company which has used the factoring and not directly to the factoring provider. Thus, the customer management remains completely on the side of the company. As a factoring company, silent factoring is a simple, discreet way to get cash quickly.

Full order books, but hardly any liquidity

Especially in small and medium-sized companies this is not uncommon and very often defaulting payers are responsible. Such situations are sometimes even dangerous for companies, as the ability to pay must always be ensured. Factoring is a viable solution. But what exactly is factoring and what should companies consider? This guide will highlight important aspects of the topic.

What is factoring?

Factoring is the sale of own receivables to secure liquidity. A company therefore agrees with a bank or a special factoring provider (factor) that the latter assumes the company’s claim and pays the outstanding amount. Since factoring does not work free of charge, a factoring fee will be charged along with interest on the loan. The factor then tries to collect the money from the customer for their own account.

What is the difference between genuine and unreal factoring?

In practice, a distinction is often made between genuine and unreal factoring. But how can the two species are characterized in each case?

True vs. wrong factoring

It is easy to see that genuine factoring is characterized above all by the factor’s assumption of risk. The factor buys the claim so completely and also assumes liability for a default. The factoring customer receives the promised payment and can also delete the claim from its balance sheet. By contrast, counterfeit factoring is rather a kind of loan and the receivable is transferred as collateral. The risk of default remains with the factoring customer in this variant.