WHAT IS IT?
Factoring or financial assignment consists in the acquisition of short-term credits derived from the sale of products or provision of services in the internal and external markets.
According to the Decree-Law n.º 171/95: The activity of Factoring includes complementary actions of collaboration between Factoring Societies and its clients, namely, credit risk studies and the accounting and legal commercial support towards the good management of the assigned credits. [ALF’s translation]
FACTOR factoring company
CLIENT/ASSIGNOR the company which is the Factor’s client
DEBTOR who has a debt to the Client (and who is his client)
• Financing, advancement over invoices related with the transaction of commercial credits;
• Credit collection services;
• Information services (commercial, accounting);
• Legal assistance (litigation, etc);
• Credit risk studies;
• Assignment of credit limits per Debtor (security in sales on credit).
Factoring may be used by all companies, SME’s or large enterprises, which sell on credit to its clients in the domestic and external markets. It is the most cost-effective, agile and efficient tool with the capacity to manage all issues arising from sales on credit and the long payment periods, allowing for an optimization of the treasury management.
Due to the ever increasing technological development of Factoring, there is an increasing wider range of companies with a smaller invoicing volume which can benefit from the advantages of resorting to Factoring.