![]() Typically, the two factors use an established framework such as the General Rules for International Factoring (GRIF), provided by FCI. The two Factors establish a contractual or correspondent relationship to service the buyer and the seller respectively under which the Import Factor in effect, guarantees the receipt of funds from the importer and remits payment to the Export Factor. One factor is in the buyer’s country (known as the ‘Import Factor’) and the other in the seller’s country (known as the ‘Export Factor’). Cross-border factoring is possible using the two-factor system. The vast majority of factoring is domestic and individual invoices are often of a low value. It can be with or without recourse to the seller and may or may not be notified to the buyer or obligor. Conversely, a factor may select which invoices he wishes to buy. This is known as whole turn-over factoring. For example, a factor may agree, subject to limits, to buy the whole of a seller’s receivables. Naturally, management fees for invoice discounting are usually a lot lower, however a company must demonstrate they have the correct procedures in place to support an Invoice Discounting facility.įactoring solutions offer the seller of a receivable a wider service than just the advance of funds to shorten its cash conversion cycle as the entity buying the receivable will also usually take on the responsibility of collecting the debt.įactoring can take several forms. Invoice discounting on the other hand, allows you to keep your credit control in house but as we already discussed, it would require a monthly reconciliation with the invoice financier. The main difference between factoring and invoice discounting is that with factoring, a funder will have full visibility of your sales ledger and maintain this by chasing debts on your behalf. A selective facility is a good option if a business needs a certain amount of cashflow guaranteed each month or if one or two customers are good payers.lend) or invoice discount just some of the submitted invoices Under a selective facility a business can opt to factor (i.e.With factoring – each individual invoice is uploaded – with Invoice Discounting, a bulk figure is uploaded and then drawn down against with the monthly reconciliations showing where money is allotted to.Invoice discounting usually involves a company reconciling with their invoice financier monthly.The business retains control over the administration of their sales ledger.Invoice discounting is an alternative way of drawing money against the invoices of a business.Again – like factoring, there is the option to do this on a completely confidential basis. Typically, with Invoice Discounting, the borrower will have more control over their ledger. A business can choose a ‘selective’ factoring or invoice discounting facility, dependent on the funder.Many factoring companies will offer to send money same day (TT Payment, usually carries a charge) or by BACS (Free) The company may receive their funds up to two days after invoices are sent out. ![]()
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