Why Factoring?
Factoring is the process whereby a client cedes its entire debtors’ book to a factoring house as collateral and whereby the factoring house then advances up to 75% of the debtors’ book to the client. Clients generally make use of factoring where they have various debtors on their books, in general more than 10 different debtors. Through the factoring process the factoring house would take control of your whole debtors’ book and take over your credit control process whereby you would normally issue invoices to debtors and manage the collection process yourself. Only debtors below 120 days outstanding would qualify for factoring. All your debtors would have to pay directly to the factoring house. From a risk perspective the factoring house would look at the balance sheet of the client to determine if they qualify for a factoring facility.