Factoring
Reliably cover costs and realise investments with factoring
Factoring (= sale of receivables) refers to the one-off or ongoing sale of receivables to a factoring company (factor). The factoring company pays the entrepreneur the outstanding amount of the receivable directly, thereby increasing the entrepreneur's liquidity.
The sale of the receivable can also be accompanied by the outsourcing of the dunning and accounting process as well as the risk of non-payment. While factoring used to be reserved for large companies, small and medium-sized enterprises and freelancers can now also benefit from factoring advantages. As the target group has grown, the number of factoring providers has also increased rapidly: There are now well over 300 factoring providers on the market. Our aim is to find the most favourable factoring partner for you.
Factoring types at a glance
No two companies are exactly alike. Companies have different structures, needs and customers. That's why factoring has be tailored to each corporations individual needs. Our financing advisors will find the right solution for you - even if it means thinking outside the box.
In addition to selling the accounts, you also outsource dunning and accounting as well as the risk of non-payment to the factor - allowing you to concentrate fully on your operational business. Small and medium-sized companies in particular prefer this factoring method as it minimises unpleasant bureaucracy.
While in genuine factoring the factor assumes the risk of non-payment, in non-genuine factoring it remains with the entrepreneur. In Germany, genuine factoring is particularly popular as it offers entrepreneurs maximum planning security.
In the case of open factoring, the company's customers are informed of the sale of the receivable by means of an assignment note. In contrast, in the case of silent factoring, the sale of the receivable is not visible to the outside world.
With in-house factoring, there is no outsourcing of dunning and accounting to the factor. This type of factoring is particularly popular with large companies that already have a professional, internal accounts receivable management system.
You can flexibly sell individual invoices to the factor as required. Freelancers and small companies in particular choose this type of factoring, as it allows them to sell receivables spontaneously and without a contractual obligation. In return, the factoring fees are usually higher here than with other types of factoring.
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The process: How factoring works
The process of a genuine factoring transaction can be simplified into six steps:
A company generates a receivable by rendering a service - e.g. delivery of goods or provision of services.
In factoring, two key elements are essential. Firstly, the authenticity of the receivable, which forms the foundation of the factoring agreement. Secondly, the creditworthiness of the debtor, as the factor assumes the full default risk upon purchasing the receivable. Consequently, the factor conducts a thorough assessment of the debtor's creditworthiness.
After successfully checking the customer's creditworthiness, the company sells its receivable to the factor.
The company receives the receivable amount no later than 48 hours after the assignment of the receivable and thus increases its liquidity. When the receivable is sold, debtor management is transferred to the factor. The factor is now the owner of the outstanding receivable and is responsible for its collection.
The customer pays the outstanding invoice to the factor.
Your advantages with factoring
Maximise your entrepreneurial scope thanks to factoring
- Increase in liquidity
As the factor settles your outstanding receivables immediately, you receive an immediate liquidity boost for planned investments.
- Improving the balance sheet
Minimising your company's outstanding receivables reduces the assets/liabilities on your balance sheet.
- Focus thanks to factoring
In the course of invoice sales, you can also outsource dunning and accounting so that you can concentrate fully on your operational business.
- Maximising planning security
When the invoice is sold, the invoice default risk is also transferred to the factor. You therefore gain planning security and minimise the risk of spontaneous liquidity losses.
Factoring FAQ
The best way to decide whether factoring is a suitable financing solution for you is on the basis of comprehensive information. We have summarised a brief overview of the most important points for you here.
Factoring is a financing instrument in which companies sell their outstanding receivables to a factoring company. The factoring company pays the company a portion of the receivable amount in advance and thus assumes the risk of non-payment.
A company sells its receivables to the factoring company, which takes over the collection. The factor pays the company a pre-financing of approx. 80-90% of the receivable amount. As soon as the receivable is settled, the company receives the remaining amount minus a factoring fee.
Factoring is generally suitable for all companies that have a high number of receivables and a long payment period. The financing model makes it possible to get the money faster and minimise the risk of default. Factoring can also be a sensible option for start-ups and companies with a poor credit rating.
Customers of Finanzierung.com appreciate these advantages
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