Great Details for the proper Factoring Properly Now

The payment behavior of many customers makes the craft to create. Those who do not want to wait long for the money can sell their claims to a factoring company. The pays immediately and takes over the receivables management.

The payment behavior of many customers makes the craft to create. Those who do not want to wait long for the money can sell their claims to a factoring company. The pays immediately and takes over the receivables management. In there the factoring accounts receivable is very important now.

Services of the factoring company

Factoring is a versatile financial service that is being used more and more by smaller companies, the Federal Association Factoring for medium-sized businesses describes the service offer of its member companies. The services of the Factoring Institute (Factor) include:

  • Financing through purchase of receivables
  • Protection against bad debts

An opportunity for the craft?

Factoring can improve liquidity and strengthen the equity ratio. Handicraft companies are particularly struggling with both problems. Nevertheless, only 4.1 percent of companies in the trades regularly use factoring as a financing instrument. However, given the ongoing deterioration in payment behavior and increased bad debt losses, it is precisely this instrument that makes it possible for many craft businesses to obtain insecure claims. However, the higher input in the skilled trades would stand in the way of the high input thresholds for factoring transactions, which can often not be reached by craft enterprises.

Rights and duties in factoring

The conditions under which a factor buys a customer’s claims can be negotiated individually. However, as a rule, the agreements provide for the following rights and obligations:

  • The factoring institute buys the money claims of its customers within the framework of a previously agreed limit.
  • Before and after conclusion of the contract, the factor continuously checks the creditworthiness of the debtor of his customer.

The factor assumes the full risk within an agreed limit if an invoice should not be paid. He immediately transfers the invoice amount less the agreed factoring fee (generally two to eight percent) to the customer. In addition, the factor retains between 10 and 20 percent of the purchase price as collateral for complaints and discount deductions. If the factor has also taken over the risk protection against bad debts, he pays the security also in the case of non-payment of the debtor to the enterprise.For its part, the company undertakes to offer the factor all claims for sale.

However, the factor does not have to accept all claims, for example if its credit check shows that the debtor is not creditworthy.

Building trades remain outside

You can claim cash discount when purchasing and thus use a major advantage of factoring the improved liquidity.Dental laboratories are also well suited, according to some factors. Dental technicians have a decisive advantage over many other craftsmen: With them, deficiencies are not compensated by deduction of invoice, but the laboratory must provide replacement. And that does not affect a factor.

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