Factoring explained


What is factoring?

Factoring is a package of financial services that facilitates the development of small and medium sized enterprises and the big companies’ cash-flow fluidization in correlation with sales, ensures the encashment of debts, offers refinancing based on the debts resulted from commercial contracts.
Factoring helps suppliers continue their activity without worrying about the encashment of invoices at maturity, allowing them to focus more on the development possibilities. Factoring also helps the assigned debtors maintain the business sustainability by ensuring a performing supplies flow.

The factoring activity means the assignment to Direct Factor IFN of the right to cash-in the invoices issued by the supplier (afferent to contractual relations included in the factoring contract), giving the supplier the possibility to receive in advance, after the goods and/or services delivery, up to 80% of the value of invoices, receiving the difference (reserve) after the assigned debtors pay. The liquidities received may be used according to the immediate necessities of the company.

Who should use factoring?

Factoring is a product dedicated to small and medium enterprises which deliver goods or provide services with payment term.

Our partners produce, sell products for mass consumption or seasonal, or provide high level services.

Companies to whom our financing product is addressed to work in different fields of activity, such as:

  • Personnel Leasing
  • IT & Electronics
  • Production
  • Transportation
  • Courier Services
  • Logistics
  • Commerce
  • Other services

How does factoring work?

Based on a contract between two parties, the seller (Supplier) delivers goods / provides services to the buyer (Debtor 1, 2, 3 etc.) and invoices accordingly.

The supplier sends the invoice and any other delivery documents to Direct Factor IFN. In maximum 24 hours after receiving all documents, our company will finance up to 80% of the invoice value.

At due date, the Debtor pays the invoice in the factoring account of Direct Factor IFN.
After collection, the Supplier receives the difference of 20%, less the financing expenses.

1. Products / services delivery
2. Copy of invoice and delivery documents
3. Refinancing (up to 80% of invoice value)
4. Collection from Debtors
5. Reimbursing invoice difference (20% less expenses)


Factoring advantages

Factoring is a real solution for financing invoices with payment term, which creates a competitive advantage for companies. Thus the possibility to increase the turnover or to achieve equity arises. Factoring also develops the company's ability to work with different terms of payment.

Specifically, factoring will help your company:

  • Transform an encashment on term into encashment on sight;
  • Improve the company cash-flow;
  • Receive significant price discounts from your partners;
  • Receive a much more flexible way of refinancing, compared to a bank loan;
  • Focus on production and sales, rather than following-up the encashment of debts;
  • Receive encashment of all assigned receivables from one source;
  • Increasing the asset turnover;
  • Benefit from Direct Factor IFN’s specialized experience;