Factoring – is an effective economic tool that allows manufacturers and suppliers of various goods to solve many financial problems quickly.
Such basic types of factoring are distinguished:
- Factoring with recourse and collateral;
- Factoring without recourse;
- Factoring with recourse.
Factoring with recourse
This type of factoring means financing of the Customer under the assignment of the rights of a monetary claim against a third party – the Debtor. If the Debtor fails to fulfill the obligations specified in the contract in specified terms, the Factor has the right to return to the Client the right of the monetary claim and reimburse the amount of funding and the commission for provision of factoring services.
Recourse factoring is applicable for mass operations, in order to gain necessary initial statistics.
Factoring with recourse and collateral
This type of factoring is factoring financing with recourse. In this case, the client is obliged to provide collateral to cover the amount of funding provided.
Factoring with recourse and collateral applies at the stage of verification of payment discipline of client counterparties, as well as for the accumulation of statistics and financing customers with a high level of risk.
Factoring without recourse
Non-recourse factoring is also customer financing against the assignment of the rights of a monetary claim against the Debtor. But in this case, if the third party fails to fulfill the obligations specified in the contract in specified terms, the Factor has no right to return the required money to the Client.
Factoring without recourse applies to debugged scheme for stable and trusted clients and their VIP counterparties. Factoring without recourse is the purpose of all the preliminary types of factoring.