Factoring services can be useful for any company that sells goods or services based on deferred payment terms.
Factoring is a financial instrument aimed to advance to Creditors/Suppliers future payments due from Debtors/Buyers.
Through Factoring Bank (Assignee) acquire from Client (Assignor) the rights to receive payments – represented by receivables - from its Debtors. The latter are notified accordingly.
Clients who receives payments before due time pays to the Bank interest for the period of the advance and related fees.
Factoring can be with or without recourse on Assignor.
In the first case if at maturity advanced receivables are unpaid Bank can claim back the amount advanced; in the second case the only source of reimbursement is original Debtor.