Is there a difference between factoring transactions and bank loans?

There are differences between bank loans and factoring, especially in terms of accounting techniques. While bank loans are considered financial liabilities, factoring only affects the asset side of the balance sheet. It reduces receivables and enhances the liquidity of the balance sheet. If the factoring transaction is non-recourse, it can be completely excluded from the balance sheet.

Who can benefit from factoring transactions?

Legal entities (companies) can use factoring services for both their domestic and international sales. Individuals cannot engage in factoring transactions.

How is advance payment calculated in factoring transactions?

In factoring transactions, the calculation is based on the payment terms of the receivables and the amount of receivables purchased.

Can we transfer our open account sales to a factoring company?

Businesses operating on open account terms can transfer their receivables to a factoring company through a factoring contract.

What is the maturity period of receivables to be purchased in factoring transactions?

In factoring transactions, short-term receivables can be factored.

Are there minimum and maximum transaction limits in factoring?

The transaction limit depends on the quality of your company's receivables, and there is no minimum limit for factoring.

Is it possible to benefit from factoring even if there is no financing need?

Collection and/or guarantee services can be utilized without requiring financing.

Is an issued invoice required to benefit from factoring?

The legislation stipulates that the receivables subject to factoring must be based on an invoice or a similar document. Receivables that have already arisen or will arise can be subject to factoring.

What is revocable and irrevocable factoring?

In irrevocable factoring transactions, the factoring company assumes the risk of non-collection of the receivable, and the seller is not held liable, except in cases of defective goods.

In revocable factoring transactions, the factoring company does not assume the risk of non-payment of the receivable, and any advance payments made to the seller for this receivable are subject to recourse from the seller if the buyer fails to make payment.

Which taxes apply to factoring transactions?

In domestic factoring transactions, interest, commissions, and expenses are subject to a 5% Banking and Insurance Transactions Tax (BITT), and factoring contracts are exempt from stamp duty.

For which types of sales can export factoring services be used?

Export factoring services are provided through correspondent factoring institutions only for credit sales and payment against goods sales.