Documentary factoring is a factoring business in which a commercial factoring company signs a commercial service factoring contract with the debtor of accounts receivable to transfer accounts receivable. When the borrower pays the accounts receivable by bank draft, the borrower immediately transfers the bank draft endorsement to the commercial factoring company, or after the borrower transfers the commercial bill endorsement to the accounts receivable debtor, the accounts receivable debtor transfers the bank draft endorsement to the commercial factoring company according to the commitment of the commercial service factoring contract.
Definition:
It refers to an agency theory between sellers, distributors or export companies and factors. According to the contract, the seller, distributor or export company transfers its current or future accounts receivable arising from the goods sales or service agreement signed with the buyer (borrower) to the factor, and the factor will provide at least two services, such as factoring financing, marketing account management, accounts receivable dunning, credit risk manipulation and bad debt loan guarantee.
Classification:
1. Discount of bills with recourse
Bill discounting with recourse means that dealers transfer the debts of accounts receivable to financial institutions (that is, bill discounters). After the distributor obtains the account, if the buyer refuses to pay or is unable to pay, the factor has the right to recover from the distributor and agree that the current assets will be used to repay the advance payment.
2. Non-recourse factoring
On the other hand, non-recourse factoring is the risk that the buyer refuses to pay or is unable to pay separately. After the distributor and the factor carry out the factoring business, it is equivalent to returning all the risks to the financial institution. Due to the high risk, financial institutions generally do not accept it.
3. Ming Bao Li
Distinguish explicit factoring from implicit factoring according to whether the factoring business informs the buyer. Explicit factoring means that in the case of debt transfer, the supplier should immediately inform the buyer of the factoring situation and indicate that the buyer will immediately hand over the loan to the factor.
4. Secret agency financing
Implicit factoring refers to excluding the buyer from the factoring business, and financial institutions and suppliers independently carry out the factoring business. After the expiration, the supplier agrees to make a dunning and then hand it over to the factor. According to secret factoring, suppliers can conceal the fact that their assets are not strong.
5. Discount factoring
Discount factoring, also known as equity financing factoring, means that when the export company gives the documents indicating accounts receivable to the factor, the factor immediately gives the export company no more than 80% of the accounts receivable equity financing by deposit, and the remaining 20% of the accounts receivable are settled after the factor deducts all the loans of the borrower (buyer). It is a typical factoring method.
6. Expired factoring
Maturity factoring refers to the fact that when the factoring company receives the bills submitted by the exporting company, it does not carry out equity financing to the exporting company, that is, the sales list of accounts receivable, but only pays the payment to the exporting company after the bills expire. Regardless of whether the loan can be received at that time, the factor must pay the purchase price.
Commercial factoring is a profitable and corporate factoring institution, which can also be called a factor. A factor refers to an institution that provides factoring services. There are generally two factors: financial institutions and non-banks.
The Factor shall provide it with at least the following two services:
1, factoring financing. According to the seller's asset demand, the factor can provide equity financing to the seller immediately after receiving the transferred accounts receivable to help the seller cope with the shortage of working capital.
2. Management method of market sales ledger. According to the provisions of the seller, the factor can provide the seller with the purchasing status of accounts receivable, the status of accounts receivable in loans overdue, aging analysis, etc. On time, and push all kinds of reports to help sellers with marketing management. 3. Accounts receivable dunning. Factors have professionals to collect accounts, and they will help sellers buy them safely in a reasonable, powerful and restrained way according to the time when the accounts are collected in loans overdue. 4. Credit risk manipulation and bad debt loss loan guarantee. The factor can verify the credit line for the seller according to the seller's requirements, and provide 100% bad debt loan guarantee for the accounts receivable caused by the seller's shipment within the credit line.
3. Accounts receivable dunning. Factors have professionals to collect accounts, and they will help sellers buy them safely in a reasonable, powerful and restrained way according to the time when the accounts are collected in loans overdue.
4. Credit risk manipulation and bad debt loss loan guarantee. The factor can verify the credit line for the seller according to the seller's requirements, and provide 100% bad debt loan guarantee for the accounts receivable caused by the seller's shipment within the credit line.