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Factoring

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FACTORING

Have a rapid access to your own liquidity assets

Factoring or receivables credit (B2C and B2B): an advantageous source of financing, allowing early conversion of the company’s receivables into cash assets.

In particular, factoring is suitable for young entrepreneurs with rapidly growing businesses who cannot or do not want to finance growing turnover with their own cash assets or with bank loans, and who would like to insure themselves against losses on debtors.

Factoring is a type of financing in which a financial company or factor buys other company’s accounts receivables, i.e., the invoiced money that the company is owed by your customers.

When a seller sends its customer an invoice, the factoring company pays the seller between 70% and 90% of the invoice’s value immediately. The seller gets the balance when the customer has paid the invoice.
This form of financing helps businesses with cash flow problems to close the gap between invoicing and incoming payments and solve the issues with working capital.

What is different with ‘Confidential’ Factoring?

As the name suggests, confidential factoring allows you not to reveal your affiliation with the financial organisation (factor) to your customers and thus keep your need for liquidity confidential. The basic principles of factoring will still be in use with confidential factoring.

You still raise your sales invoices as normal, and you still send the invoices to the factoring provider (factor). You still get advanced the agreed percentage value of the outstanding invoice and the factor provider still chases for payments.

The only difference is in how the factoring provider introduces itself to your customers. With normal factoring, the provider will use its own name; with confidential factoring, the factor acts as your own accounting department and uses your company name when contacting customers.

What are the advantages of using factoring?

Benefit from working capital at all times

Benefit from discounts and rebates from suppliers by paying invoices within a short period of time

Significant relief in administration

Suitable way of financing for a company in a growth phase

Protection against the various risks of non-payment by your customers (credit insurance available)

Are you still unsure if factoring is the appropriate financing solution for your company? No worries, contact our
professionals to get a tailor made advice from PrestaFlex financial experts.

Is factoring right for my company?

Factoring is a current topic at companies in Switzerland.

Many factoring companies offer this service. In this article, we will look at what factoring exactly is and what advantages it has for your company.

Factoring is a financing option for businesses, similar to credits or loans. But just similar. We want to explain factoring using an example:

A company X has claims against a customer K. This means that the customer has received a delivery or service from the company, but has not yet paid any money for it. Now, X urgently needs money for a supplier. Using factoring, the company now sells these claims to a factoring company. X now receives between 70 and 90% of the claim directly as liquid funds from the factoring company.

The claim now passes from X to the factoring company, and K does not pay X but the factoring company. If the factoring company has been paid by K, X will receive the remaining amount.

 

WHAT ARE THE ADVANTAGES OF FACTORING?

 

  • You benefit from working capital at all times

Probably the most significant advantage of factoring is that you can access your capital at any time. Once your customers have signed a contract with you, you can convert your money directly into cash instead of waiting for a long time.

  • You benefit from discounts and rebates from suppliers.

Many suppliers give discounts, also known as cash discounts, if customers pay for goods or services immediately. Usually, you save 2-10% when you use your discount option. This can be very profitable for companies buying high-value goods. Financing through a factoring company is significantly cheaper than a so-called supplier credit for most companies in Switzerland.

  • Significant relief in terms of administration

Many companies use factoring in Switzerland to reduce administrative costs. You no longer have to worry about collecting your money. After providing your customer with the goods or service, you pass the claim on to the factoring company. Your administrative process is now complete. The factoring company now takes care of the collection, dunning letters, and everything related to the claim.

  • A suitable financing solution for a company in a growth phase

Factoring companies mainly help companies that are growing rapidly. When your business overgrows, so does the cost. Therefore, especially in the growth phase, liquid funds are often required to pay suppliers, etc. Supplier credits are expensive and uneconomical, which is why it is advisable to work with a factoring company at this stage.

  • Protection against the risk of your customers defaulting on payments

When you work with a factoring company, you also minimize the risk of your customers defaulting on payments. If your customer becomes insolvent, the factoring company will take care of this problem. You usually don’t have to worry about anything. This not only minimizes the risk of payment defaults, but also minimizes your legal fees.

 

Have you ever considered whether factoring would be beneficial for your Swiss company? We at PrestaFlex have been there for you since 2013 for advice on corporate finance. We advise you which corporate financing is the best for your company and arrange the best deals for you.

 

Book a free consultation today

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