What is bank factoring?

1. Bank factoring is a new comprehensive financial service integrating trade financing, business credit investigation, accounts receivable management and credit risk guarantee. The factoring business of banks can be divided into domestic factoring business and foreign factoring business.

Generally speaking, domestic factoring business is also called accounts receivable financing, that is, after the company passes the bank's audit, it transfers your accounts receivable to the bank and obtains funds in advance. According to different types, it can be divided into buyout factoring and repurchase factoring. The audit point of factoring bank is mainly to audit the repayment ability of the debtor (that is, the company that owes money to the company).

3. Foreign factoring business is mainly a financial product designed according to the import and export business of import and export enterprises, and its main function is to allow import and export enterprises to obtain funds in advance. Specific products include packaged loans, invoice discounts and so on.

Second, factoring has many different ways of operation.

Generally, it can be divided into: factoring with recourse and recourse; Explicit factoring and implicit factoring; Discount factoring and maturity factoring

1. recourse factoring and non-recourse factoring

Recourse factoring means that the supplier transfers the creditor's rights of accounts receivable to the bank (that is, the factor). After the supplier receives the payment, if the buyer refuses to pay or is unable to pay, the factor has the right to recover from the supplier and demand repayment of the prepaid monetary funds. At present, due to the principle of prudence, in order to reduce the possible losses in the future, banks usually provide customers with factoring with recourse.

On the other hand, non-recourse factoring is the risk that the buyer refuses to pay or is unable to pay. After the supplier and the factor carry out the factoring business, it is equivalent to transferring all the risks to the bank. Because the risk is too high, banks generally don't accept it.

2. Explicit factoring and implicit factoring

Explicit factoring and implicit factoring are distinguished according to whether the factoring business is notified to the buyer. Explicit factoring means that the supplier should immediately inform the buyer of the factoring situation when the creditor's rights are transferred, and instruct the buyer to pay the goods directly to the factor.

Implicit factoring is to exclude the buyer from the factoring business, and the bank and the supplier conduct factoring business separately. After the expiration, the supplier will come forward to ask for payment and then hand it over to the factor. Suppliers can cover up their poor financial situation through secret agents.

3. Discount factoring and maturity factoring

Discount factoring, also known as financing factoring, means that when the exporter gives the bill representing the accounts receivable to the factor, the factor immediately provides the exporter with prepayment financing of no more than 80% of the accounts receivable, and the remaining 20% of the accounts receivable is settled after the factor collects all the payment from the debtor (importer). This is a typical factoring method.

Maturity factoring means that the factor does not provide financing to the exporter when receiving the documents submitted by the exporter (such as sales invoices representing accounts receivable), but pays the payment to the exporter after the documents expire. Whether or not payment can be received at that time, the factor must pay the money.

Extended data:

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 a method 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 the liquidity when the payment is settled by collection or credit in commercial trade.

References:

Bank Factoring Baidu Encyclopedia