Factoring as the oldest financial service and a means of securing necessary funds for unhindered further business operations and timely settlement of obligations
26.02.2024.
Factoring is undoubtedly the oldest financial service, more closely regulated by the Law on Factoring (“Official Gazette of the RS” No. 62/2013 and 30/2018) (“the Law“), which means the purchase and sale of an existing non-due or future short-term monetary claim, one that is due for collection in within one year from the date of sale of goods or provision of services in the country or abroad. Factoring can be performed exclusively based on a contract concluded in written or electronic form as prescribed by the Law.
Who are the participants in factoring?
- Assignor – sells his claim from the debtor to the factor;
- Factor – buys the claim from the assignor and can be a bank or a company organized as a joint-stock company or a limited liability company;
- Debtor – a bank, a company or entrepreneur with headquarters in the Republic of Serbia, i.e. such entities with headquarters abroad registered in accordance with domicile regulations.
What types of factoring are there?
I
- Local factoring – factoring participants are local entities, and the sale of goods or provision of services takes place on the local market;
- International factoring – the subject of which is the sale of receivables arising from international goods and services trade .
II
- Factoring without recourse – the factor assumes the risk of debt collection;
- Factoring with recourse – on the due date of the claim, the assignor is responsible to the factor for the collectability of the claim.
III
- Direct factoring – agreed between the factor and the creditor from the contract for the sale of goods or the provision of services in the country and abroad;
- Reverse factoring – contracts are concluded between the factor and the debtor from the contract for the sale of goods or the provision of services in the country and abroad, where the factor undertakes the obligation to pay to the creditor and has the right to collect from the debtor within the period from the contract for the sale of goods or the provision of services in the country and abroad.
What is the cost of factoring?
The factoring user pays the factor a fee that depends on a number of circumstances such as: volume of business carried out with the factor, type of factoring, transferor’s creditworthiness, debtor’s creditworthiness, currency, etc. The fee comprises a discount rate (a rate expressed in percentages that are usually calculated on a monthly basis) and a one-time request processing fee. The two standard factoring fee calculation models are the fixed fee model and the variable fee model.
If, as a legal entity or entrepreneur, you are faced with liquidity issues or collection of your receivables, factoring helps you get the funds needed for further operations and timely settlement of your obligations almost instantly. This financial service is not recorded in the credit bureau and does not affect creditworthiness and provides the possibility of obtaining funds in a simple and fast way that can be freely disposed of in accordance with needs and obligations.
Therefore, if you are a seller or a service provider, after you have issued an invoice with deferred payment, you can submit a request to the factor for factoring. Upon receipt of the request, the factor checks the customer’s creditworthiness and provides an answer within a short period of time as to whether he is interested in cooperation and under what conditions.
Additionally, if you are considering establishing a company for the performance of factoring and factoring-related activities, you must consider the conditions required for registering the relevant company and the obtaining of the mandatory work permit.
For more information, contact us at snezana.maksimovic@ksel.rs and ksenija.sorajic@ksel.rs
