What does debt factoring mean?

Debt factoring means that there is no implicated relationship between the main debt and the subordinate debt, and the subordinate debt is invalid and invalid, which does not affect the existence and invalidity of the main debt. But this also needs to be analyzed in detail. For example, the debt of liquidated damages is an accessory debt in a bilateral contract, and there is no consideration relationship with the main debt, so it cannot be established, and the right of defense can be fulfilled at the same time; The debt of damages is the civil liability that one party to a bilateral contract should bear after breach of contract, and it has a consideration relationship with the main debt. Therefore, when the debt of damages is established, the right of defense can be exercised.

What is factoring?

The full name of factoring is guaranteed agent, also known as collection and guaranteed payment. The seller transfers its current or future accounts receivable based on the goods sales/service contract signed with the buyer to the factor (a financial institution providing factoring services), and the factor provides it with a series of comprehensive financial 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.

Problems needing attention in factoring business

1. The buyer (importer) must have a good reputation or credit so that the import factor can verify a certain credit limit for it, otherwise it will not be accepted.

2. Before continuing the factoring business, before signing the export contract formally, we should do a lot of work such as application, credit evaluation and credit line verification.

3. Only after the export factor and the exporter have agreed to handle the factoring business, that is, the export factor has approved the credit line for the importer, can the foreign trade contract be formally signed or the goods be shipped.

4. Pay attention to the usage of the importer's credit line (balance status) and the changes of its credit status. Always keep effective communication with export agents.

Never exceed the approved credit limit.

6. If you need financing, you need to know the interest rate in advance.

7. Another important issue that should be paid attention to when adopting factoring service is to understand the cost level of factoring. As far as we know, this is one of the main reasons why factoring has not been widely used.