:: : What is Factoring?
:: : How does factoring work?
:: : What are the benefits of factoring for your business?
:: : How is factoring organized?
:: : Who are factoring companies’ clients?
:: : Do factoring companies make loans?
:: : What is the purchase factor?
:: : What is a mercantile sale?
:: : What are the obligations of the factoring customer?
:: : What is "supervening negligence"?


What is Factoring? (Top)
It is a commercial activity designed to give support to small and medium companies by purchasing receivables for sales or services from the companies in advance of the A/R due dates.

How does factoring work? (Top)
The factoring company buys the rights from the customer to directly receive the proceeds of invoices from sales or services provided by the customer to its customers.

What are the benefits of factoring for your business? (Top)
• The factoring company provides advice to help the customer make important financial management decisions.
• With the help of the factoring company, the customer spends less time involved with the routine activities of A/P and A/R, thus freeing up time for more important management activities such as new product development, increased production, cost reduction, etc.
• Better cash flow, ability to pay cash for goods and services and receive discounts, and the ability to accelerate sales turnover.
• Improve bargaining power with suppliers.
• Increased credit lines, overdraft facilities, and credit analysis services.
• Debt elimination.
• More time to spend growing your business.

How is factoring organized? (Top)
Factoring is a legal commercial activity, regulated by the laws in effect in the country of origin. Factoring companies in Brazil are associated with the ‘Sistema ANFAC/FEBRAFAC’. They follow the systematic rules and procedures detailed in its code of ethics, methods and arbitration. They also invest in equipment and human resources. Currently in Brazil, more than 65,000 small and medium businesses are customers of factoring companies, of which 85% are in the industrial production sector.

Who are factoring companies’ clients? (Top)
Companies or autonomous professionals that are legally constituted and have a business license. Factoring is most commonly used by businesses in the productive sector.

Do factoring companies make loans? (Top)
No, they don’t. Factoring is not a credit operation. Factoring is neither financing nor discounting, but the purchasing of credit rights for a price mutually agreed upon between all parties concerned.

What is the purchase factor? (Top)
It is the price for which factoring companies buy the rights to directly receive the proceeds resulting from sales and services of the customer.

What is a ‘sale’ in the factoring sense? (Top)
It is a buying and selling operation of an A/R invoice or other credit document between a factoring company and its customer.

What are the obligations of the factoring customer? (Top)
• The delivery of the invoiced merchandise
• The transfer of the right to receive payment for the invoice
• The responsibility for any problems in the completion of the transaction

What is “supervening negligence”? (Top)
Inherent or hidden defects, which render the factored product or service inappropriate for the use that it was intended, or invalidates the contract or the transaction so that it cannot be fulfilled, provide said defects were known.