Frequently asked Questions about Factoring

Who can benefit from factoring operations?

Corporate entities waiting for the maturity date to close on their goods sold or services provided can work with a factor. Real persons and single individuals can not deal with a factor.

What taxes are involved in the process?

Inland factoring operations are subject to a 5% BSMV tax. Export factoring is tax free. The general factoring contract is free from any taxes.

What are the costs involved?

Commission: against services renderred, depending on the service, it differs from one client to another.
Interest : is set according to market conditions during prepayment.

Are all receivables transferrable to the factor?

Generally yes. The only exceptions are :

• when either the buyer or the customer, is legally banned from making payments to third parties.
• when the selling and buying parties do have a relationship that is beyond simple commercial transaction, such as partnership, secret merging and/or transfer of ownership etc…

How long can exactly be the maturity date on receivables subject to factoring?

Between 30 to 120 days in general.

Must an invoice have absolutely been issued in order to benefit from factoring transactions?

The receivables subject to factoring must be relied upon an invoice or a similar document. This means that the transaction is mainly based on invoice. However, factoring may also extend to receivables for which an invoice cannot be issued for technical or legal reasons, and which are evidenced by a similar document.

What kinds of transactions fall into the category of export factoring?

All future transactions made against goods sold to overseas are subject to export factoring.

What is the difference between factoring and bank credit against promissory notes?

In bank credits against promissory notes, the promissory notes stand as a security for the credit facility and are transferred to the bank with an endorsement for security purposes and are continued to be traced in the "billed receivables" account in the assets side of the balance sheet, while the credit borrowed against promissory notes is recognized in "financial debts" account in the liabilities side. Whereas, in factoring, a promissory note, associated with invoice, represents directly the amount of receivables, and is transferred to the factoring company with an endorsement for assignment, and the amount of the transferred promissory note is deducted from the "billed receivables" item in the balance sheet, is turned into cash, and is not shown in "financial debts".