Factoring is an agreement between a Factor (in this case, EUROFACTOR HISPANIA) and a client. Through this agreement, the client sells its accounts receivables to the Factor who in turn becomes the holder of these accounts.

The holder of these accounts undertakes the risk of non-payment from the buyers due to insolvency. The Factor also facilitates invoice collection and management. The Factoring company can advance funds based on the invoice submitted by the client.

There are four basic services:

• Classification and Portfolio Management
• Payment Management
• Insolvency Hedging
• Advances on Credit Granted

This is how Factoring is best defined:

YOU		WE
Produce		Finance
Sell		Get Paid
Open Markets		Hedge Insolvencies
Negotiate		Manage

HOW FACTORING CAN BE GOOD FOR YOUR COMPANY?

Factoring may be employed by any company regardless of size or business sector, whose invoicing generates short-term credits, and is well suited for small and medium firms with a capacity for growth.

However, given the many advantages, it is increasingly common to find large companies who decide to subcontract the management of their Client Portfolio to a Factor.

In terms of Export Factoring, with EUROFACTOR HISPANIA, exports are more competitive as it accepts any form of international payment and is not be affected by financial problems facing its buyers, receiving payment through one of the world’s major financial groups.


FACTORING WITHOUT RESOURCE

Unlike Factoring WITH RESOURCE, the Factoring company, in addition to providing the client with one or more of the services typical of Factoring (invoice collection, financing, etc.), underwrites the risk of insolvency or payment arrears by the debtor. The Factor relinquishes charging the client for any unpaid or returned invoices resulting from insolvency or payment arrears. What’s more, the Factor undertakes the risk of the entire debt 100% hedging.

This does not imply that the risk hedge includes any situation involving non-payment, but rather only those in which the cause of non-payment is debtor insolvency, the latter being understood as basically a treasury adjustment, either permanent or temporary, that prevents the debtor from fulfilling his payment obligations.

Not included are other situations involving commercial disputes (derived from the drafting of invoices, problems with merchandise delivery, etc.).

In short, Factoring Without Resource offers the following services:

• Analysis and classification of Clients, national as well as foreign.
• Managing the payment of Client credits.
• Advances on credits granted (up to 90%).
• Insolvency hedging (100%).


EXPORT FACTORING

Offers the same services as DOMESTIC Factoring (National), but is particularly important in the case of exports given that it provides greater security regarding forms of international payment such as checks or money transfers given that transferring credit management to the factor including insolvency risk, payments received go directly to the Factoring company.

Being able to operate abroad using these types of payments considerably increases the exporter’s potential markets, given that the debtor is not always willing to open documentary credits or accept documentary remittance, payment instruments that while safe are slow and difficult to manage.

At EUROFACTOR HISPANIA we use an indirect system for this type of Factoring.

With this system, the exporter’s Factoring company contacts another Factoring company in the importing country and subcontracts the operation so that the latter manages payment and undertakes the risk of insolvency. Hence, the Importing Factor, provides a study and classification of debtors located in that country.

The function of the Export Factor (EUROFACTOR HISPANIA) focuses on providing the corresponding financing and acts as an intermediary between the Factor(s) and the Importer(s) and the Principal Exporter, offering detailed information on credits, Clients, incidences, bankruptcies, etc.

This system is usually carried out through International Factoring chains who despite having a different legal nature, harnesses the potential of Factoring companies located in practically all developed countries.

There are two major Factoring groups worldwide: Factors Chain International and International Factors Group (EUROFACTOR HISPANIA is affiliated with the second one).

In addition to these two groups, our clients have our own network (EUROFACTOR), with branches in seven European countries.

DIFFERENCES IN FACTORING WITHOUT RECOURSE USING SIMILAR FIGURES
WITH COMMERCIAL DISCOUNT
In terms of	FACTORING	DISCOUNT
Supporting Documents	INVOICE	EFFECT
Type of Financing	CREDIT	INSTANT
Risk	DEBT	PRINCIPAL
Managing Collections	TOTAL	BASIC
Unpaid	WITHOUT COST / MNGT RECOV	WITH COST / WITHOUT MNGT RECOV
Executive Action	AGAINST DEBTOR	AGAINST BOTH

WITH CREDIT
In terms of	FACTORING	CREDIT
Needs to be met	SALES FINANCING	CIRCULATING FINANCING
Other Services included	YES	NO
Risk	DEBTOR	PRINCIPAL
Financing limits	REVOLVING	FIXED

WITH CREDIT INSURANCE
In terms of	FACTORING	CREDIT INSURANCE
% over Client Portfolio	PARTIAL	TOTAL
Hedge limit	100%	70-90%
Managing Collections	YES	NO
Indemnity System	IMMEDIATE	FRACTIONED
Financing Possibility	YES	NO
Need to notify outstanding	NO	YES

WITH DOCUMENTARY CREDIT
In terms of	FACTORING	DOCUMENTARY CREDIT
Processing	SIMPLE	COMPLEX
Overall	YES	OPERATION TO OPERATION
Risk	DEBTOR	PRINCIPAL
Commercial Advantages	YES	NO

WITH FORFAITING
In terms of	FACTORING	FORFAITING
Period	SHORT-TERM	LONG-TERM
Scope	NATIONAL/INTERNATIONAL	INTERNATIONAL
Supporting Documents	INVOICE	EFFECT
Financing Cost	ONLY IF FINANCED	ALWAYS
Relation between parts	CONTINUOUS	SPORADIC