Precautions for factoring companies:
First, the buyer (importer) must have a good reputation or credit, and let the import factor verify a certain credit limit for it, otherwise it will not be accepted.
Two, before continuing to do factoring business, these applications, credit evaluation, credit line verification and other work must be completed before the formal signing of the export contract.
3. Only after the export factor agrees that the exporter should handle the factoring business, that is, the export factor verifies the credit line for the importer, can the foreign trade contract be formally signed or the goods be shipped.
Fourth, we should pay attention to the use of importers' credit lines (balance status) and the changes of their credit status. Always keep effective communication with export agents.
Factoring, the full name of guarantee agent, also known as collection guarantee, is a financial term. It refers to a comprehensive financial service model in which a seller transfers his current or future accounts receivable to a factor (a financial institution providing factoring services) based on a goods sales/service contract with a buyer, and the factor provides a series of services such as financing, buyer's credit evaluation, sales account management, credit risk guarantee and account collection.
It is an act that the seller entrusts a third party (the factor) to manage the accounts receivable in order to strengthen the management of accounts receivable and enhance liquidity when the payment is settled by collection or credit in commercial trade.
International definition:
The Oxford Concise Dictionary published by191defines factoring as an economic activity that buys creditor's rights from others at a lower price and obtains profits by recovering creditor's rights. This is a broad definition, which is relatively simple and fails to reflect the motivation of creditors to transfer their claims and the comprehensive service characteristics of factoring business.
British scholar Friday Salinge defined factoring as follows in his Factoring Law and Practice published in 1995: Factoring refers to the act of taking over accounts receivable for any two or all of the above purposes (except accounts receivable generated by individuals or family members and long-term payment or installment payment).