Factoring and debt management

With the globalization and internationalization of the world economy, new financial instruments are emerging that expand sources of funding and allow businesses to operate more efficiently. One of the tools that improves the solvency of the company and promotes effective management of receivables is factoring.

A factoring transaction is a financial instrument that provides additional financing by accelerating the turnover of working capital by assigning one entity the right to claim money.

Like any economic relationship, factoring transactions are governed by a contract. The factoring agreement is a bilateral civil law agreement. However, there is no single form approved by regulations, and banks or financial institutions agree on it. However, there are rules that clearly specify what information should be specified in the contract, in particular, the subject of the contract, the parties, their responsibilities, rights and obligations.

The legal basis of the factoring agreement is the cession, ie the assignment of the right of claim under the transaction. However, a factoring agreement is broader than an assignment agreement because it may contain information about the provision of related services that are not specific to the assignment.

Factoring agreements usually have different purposes and essences, so there are different types, such as real, commercial, paid and gratuitous.

It should be noted that the factoring agreement is important for accounting, as it serves as a basis for accounting for factoring transactions. Therefore, the correct generalization and grouping of data in the contract will allow to fully identify factoring transactions and reflect them in the accounts.

Thus, the problem of non-payment of receivables can be effectively eliminated with the use of an innovative financial instrument – factoring, the specifics of which are available to businesses of all forms. It is the support of factoring agreements and debt management in the interests of the client in the framework of factoring operations carried out by specialists of our law firm.