Factoring  Manufacturers, Traders, Suppliers

Factoring is an alternative form of financing in which a company assigns a certain part or all of its customer receivables from deliveries of goods and services to a financing institution, the so-called factor. In Germany, this is usually a bank or an institution specialising in this area of financing. However, according to the Banking Act factoring does not fall into the category of banking transactions.The factoring method performs three different functions: On the one hand, the seller of the claim, i.e. the manufacturer or trading company, gets into possession of the outstanding amount of money more quickly. In addition, it transfers all administrative tasks associated with the receivable and the existing credit risk to the factor. In addition to the interest, the customer receives a commission for the services provided. For example, the client agrees to offer the factor the entire set of receivables for purchase, either all receivables or only the receivables of the customer letters A to M.A factoring, in which the factor fulfils all three functions mentioned above, is called real factoring and is the form practiced in Germany above all. In contrast to this is fake factoring, in which the del credere function is not performed by the factor.