Factoring is a financing method used in both domestic and foreign trade, particularly for short-term sales of goods. In this system, factoring companies purchase the commercial receivables arising from businesses' credit sales, thereby accelerating their cash flow. Factoring involves three main parties: the customer requesting the service, the factoring company providing the service, and the buyer, who is the debtor.
Factoring services can be grouped under two main categories: Collection Management and Cash Management. These services may be used together or separately, depending on your company’s financial needs.
Collection Management: The factoring company undertakes the monitoring and collection of your receivables. For receivables under collection monitoring, financing services may also be provided without waiting for the maturity date.
Cash Management: The factoring company converts your deferred receivables into cash to meet your working capital needs. This enables you to maintain a more stable and predictable cash flow.