Factoring is a service consisting in securing the payment of receivables by a third party. The third party assumes the obligation to pay the amount due or part of the amount due if the creditor is in arrears. This is beneficial for entrepreneurs. It enables them to maintain liquidity and protects them against a possible loss in the event of a debtor’s unreliability.
The goal of factoring
Many companies choose to factor because of the benefits of maintaining liquidity. Companies with high liquidity, which settle liabilities on time, can count on discounts and other conveniences from their counterparties. Factoring allows them to prevent the loss of financial liquidity without the need to take out loans. Introducing a third party with adequate financial resources is one of the best solutions if your company has problems with regular payments.
Debt collection is the process of debt recovery by the creditor. In the case of a factoring agreement, this process is handled by the factoring provider. This provider assumes legal and financial responsibility for the debt. Usually, these are companies that have specialist knowledge of the subject and staff trained in this field. The effectiveness of such companies results from the trained staff and knowledge of legal regulations. Professional knowledge accelerates the debt collection process and reduces its costs on your part. The cost of factoring in the case of large companies is not so high, and for small companies. There are also suitable entities offering simplified and cheaper services.
Self-assisted debt collection
The entrepreneur may undertake debt recovery himself in order to recover his liabilities or hire an external company to do so. In the latter case, he delegates the power to take legal and factual action to another entity and agrees to a commission on the debt recovery service. Professional entities deal much better and more efficiently with debt collection due to the fact that they have precise knowledge and experience in this field.
Our consultants will help you choose a company that offers factoring or debt collection services. This will make it possible to reduce the risk of lack of liquidity and speed up the recovery of receivables from contractors. Guarantee peace of mind with regard to the liquidity of your company.
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