Glossary all about factoring

The overview contains an explanation and definition of the most important terms for the purchase and sale of receivables, the factoring models and the factoring environment, and offers you useful information from A to Z.

  • Customers sell larger receivables that recur regularly - for example from longer-term contracts -in a silent process to a factoring institute, which then uses them to create a capital-market viable package.

  • In selective factoring, a company only sells receivables from certain debtors to the factoring company.

  • "Basel II" compiles the capital requirements, which have been proposed by the so-called Basel Committee on Banking Supervision and were introduced with the EU directives 2006/48/EC and 2006/49/EC for all credit and financial services institutions. Basel II is intended to make the allocation of risky loans more difficult.
    This risk minimization has had a particularly negative effect on lending to medium-sized companies, as they generally have little capital.

  • Indicates a reform package for the existing regulation (Basel II). Its purpose is to eliminate the shortfalls of the previous banking regulation, which became apparent during the financial crisis that started in 2007. Basel III came into force in 2013 with a transitional period lasting several years.

  • Creditworthiness of business partners; the ongoing audit of debtors' solvency is part of the service provided by GOFACTORING SCHWEIZ AG. Creditworthiness is crucial for insurability and financial feasibility.

  • Customer bookkeeping: Within the framework of the factoring agreement, the monitoring and booking of incoming payments is carried out by the factor.

  • This includes accounts receivable accounting, regular credit assessments, arrears billing and collection. For the company, debt management is often associated with considerable time and personnel costs; the taking over of the receivables management is part of the service offered by the factor.

  • Del credere is defined as default protection, which protects the factoring customer against loss of receivables. If a debtor is unable to pay, for example, due to insolvency, the receivable will be paid by the insurance protection.

  • The factor has very limited recourse to its customers. That means in the event of customer insolvency, the factor assumes the default risk in the context of a credit insurance. This is completed by us.

  • As a consequence of Basel II and Basel III, it is becoming more and more difficult and time-consuming for well-established companies to obtain financing from a bank. Bank-independent financing tool for SMEs are therefore becoming ever more important. The financing solutions of XENUM AG, which are intertwined with the performance spectrum of GOFACTORING SCHWEIZ AG and under the joint umbrella of GOFACTORING HOLDING AG, are both innovative and interesting. For the Xenon AG financing products, the criterion of customer creditworthiness is a lot less restrictive than, for example, with bank financing because Xenum can make insurance cover available to cover customer losses. Purchase financing can also be an attractive tool for customers, who are particularly concerned that the assignment of their receivables should not be disclosed, and for customers with non-factorable receivables.

  • In principle, factoring solutions are suitable for the majority of manufacturing, trade and service sectors. For factoring to occur, products or services need to be able to be factored. The prerequisite for this is that the company's receivables are certain and complete and that its debtors have a good credit rating in B2B. Shops and private individuals cannot be factored. Our purchase financing can provide an option for non-factorable sectors, including the B2C sector.

  • The ongoing purchase of short-term new receivables arising from the supply of goods and/or services, generally against multiple customers and irrespective of whether or not the buyer assumes liability for the insolvency of the debtor. Factoring is used for short-term revenue financing and protection against bad debts; factoring also involves efficient accounts receivable management.

  • Factoring providers include factoring banks, factoring companies and factoring agencies that take over the purchase of receivables (factoring).

  • Price for the assumption of the default risk and/or the receivables management by the factor. The amount depends on, among other things, the credit risk, sector risk, amount of work involved and the size and structure of the factor. It is calculated as a percentage of the purchased receivable.

  • The factoring contract is a framework agreement between the factoring company and the factoring customer to settle the rights and obligations. Core areas are the duty of the customer to effect delivery, the obligation to purchase the factor, as well as the liability for the creditworthiness of the debtor within the agreed debtor limits.

  • Maturity factoring is primarily used to safeguard against loss of receivables. The receivable remains initially with the company and is only handed over to the factoring company after an agreed deadline has expired.

  • GOFACTORING SCHWEIZ AG's full-service factoring combines the purchase of receivables (including from international debtors) protection against loss of receivables as well as the management of receivables and arrears billing.

  • A central element of factoring is the protection against loss of receivables. Through the involvement of GOFACTORING SCHWEIZ AG, you ensure the successful completion of your business you have worked hard for. Even if your customer does not pay, your credit risk is zero. The del credere function in full-service factoring is covered by credit insurance.

  • Companies grant their customers credit for the goods and services they have provided. The credit takes the form of a period of payment. This is called trade credit. Receivables management manages, grants and administers this credit. The purpose of credit or receivables management is to minimise the loss of receivables and to maintain the necessary liquidity of the company at all times. More and more companies are transferring their receivables management to specialist factoring companies. The outsourcing of receivables or receivables management reduces the personnel and material costs and gives the company additional liquidity.

  • In certain cases, the debtor is not aware of the factoring arrangement - neither in correspondence, nor in amendments made to the invoice text. This is called non-notification factoring. Customers continue to settle their claims directly with the company, which are then passed on to the factoring company. This contract model is based on a special relationship of trust. GOFACTORING SCHWEIZ AG also offers the option of half-open factoring: Here the receivables are individually adapted to your customer structure and are either factored silently or openly.

  • In-house factoring means that the entirety of receivables management remains in the hands of the company. The factoring company takes on responsibility for the financing and del credere.

  • Collection refers to the collection of receivables. Collection is a special form of the assignment of receivables.

  • The costs of factoring are made up of the interest on the financing of the accounts receivable and the factoring fee. The interest rates correspond to the bank's current account interest, the term is calculated on the basis of the payment of the outstanding receivables. In some cases, arrears billing are also debited.

  • The limit is the maximum amount of the pre-financed receivables per customer.

  • Liquidity means the availability of sufficient funds.

  • Deficiency can cause an increased risk. This is the case, for example, when precision work is required or a product or service has to be highly adapted to each individual customer. Clients who tend to produce high-value or complex products do not qualify for factoring. Purchase financing can serve as an alternative option for such clients.

  • Part of receivables management, which is taken on by the factor.

  • Maturity factoring is primarily used to safeguard against loss of receivables. The receivable remains initially with the company and is only handed over to the factoring company after an agreed deadline has expired.

  • The customers are informed about the future cooperation of the supplier with the factor. It is by far the most common form of factoring in Switzerland.

  • Outsourcing of individual operational functions, rationalisation effect, utilisation of specialised service providers; factoring makes it possible to outsource cost and personnel-intensive receivables management.

  • A credit rating or assessment is carried out to examine a company's business situation, in order to assess its future solvency. Analysis and assessment are based on factors such as the profit and loss account, but also the company strategy and its competitive position. On the basis of their evaluation, default probabilities are determined, which form the basis of the credit conditions.

  • means that the company takes advantage of its supplier's long payment terms. After the invoice has been generated, the factor immediately transfers the invoice amount to the supplier. By making use of the discount, the process practically finances itself and can even result in a profit. This significantly strengthens a company's negotiating position with its supplier. The immediate payment of supplier receivables and the resulting utilisation of discounts are part of XENUM AG's financing solution - purchasing financing.

  • The factoring company retains a security of generally 10% to 20% of the receivables purchased. This amount covers possible defects by the debtor, compensation, bonuses and discounts. The amount will be settled or paid out upon payment by the debtor.

  • Discount means a price reduction on payment within a fixed period. The discount specified as a percentage is also referred to as the discount rate.

  • The customers are not informed about the future cooperation of the supplier with the factor. This form is problematic for the factor and usually prevents the factor from taking out del credere liability.

  • Within the scope of this contract or full-service factoring, the factor provides all services in connection with receivables processing. Our factoring clients benefit from financing in line with sales, protection against risk and substantial support in receivables management.

  • Scheduled factoring is a one-off sale of receivables to a factoring company, which takes place at the end of a fiscal year. By doing this, the balance sheet structure is positively influenced by the reduction of the asset side and the resulting increase in the equity ratio.

  • The factor has the option not to return to the factoring customer in the event of the debtor's insolvency.

  • is the planning and execution of all tasks relating to the financial activities of the company. In principle, it has two main functions: Capital procurement and securing liquidity.
    One of the areas of corporate finance is growth financing.

  • Growth financing makes up part of corporate financing. Growth financing is financing in line with a company's revenue.

  • The taking out of credit insurance serves to protect against default risks. Credit insurance premiums can be saved through cooperation with the factor.

  • The factor pays 80% of the invoice amount immediately after submission of the invoice copies; the residual sum serves as a purchase price retention and is paid after maturity, taking into account discounts, reductions or returns.

  • A cession is a transfer of receivables from the transferring creditor, also known as a cedent, to a receiving creditor who becomes the new creditor.
    In the factoring business, the factoring customer relinquishes his receivables to the factor and the latter then becomes the new creditor.