Factoring is a complate financial transaction package whereby a company assigns to a factoring company, its future receivables, which incur as a result of the goods or services it has sold to customers located at home or abroard, so that the factoring company provides guarantee, receivable and collction management services and financing services to the assignor.
In case a buyer is unable to pay its debts in connection with a transaction based on a current accoubt (or swap account), the buyer is given a guarantee subject to the limits set for them. This guarantee service can only be available for irrevocable transactions.
The receivables of a seller are assigned to a factoring company, so that they are collected through the latter. In other words, the factoring company undertakes to provide receivable collection services.
A maturity receivable to be due on a future date is paid by the factoring company to the seller at a pre-determined advance payment ratio pior to the relevant maturity date subject to the limits set for the seller.