factoringsopimukset

Factoringsopimus, or factoring agreement, is a contract in which a business (the seller or assignor) sells its accounts receivable to a financing company (the factor) in exchange for immediate cash. The factor purchases the invoices at a discount and may also provide credit assessment, invoicing services, and collections. The assignment is typically notified to customers, who then pay the factor rather than the seller.

Parties and scope: The seller retains ownership of the underlying goods or services, while the factor assumes responsibility for the administration and collection of the receivables. The contract defines eligible assets, notification requirements, and governing law.

Types: Factoring can be with recourse or without recourse to the seller. In recourse factoring, the seller may be liable for losses due to non-payment. In non-recourse factoring, the factor bears most of the bad debt risk, subject to contract terms. Variations include invoice factoring, maturity factoring, and domestic or cross-border factoring, with differences in services and risk allocation.

Process and economics: The factor advances a portion of the receivable (the advance rate), often 70–90%, and may hold a reserve. When the debtor pays, the factor releases the balance minus fees. Fees include discounting, service charges, and financing costs. Eligibility criteria may exclude older invoices or those with higher risk flags.

Impact: Factoringsopimukset aim to improve liquidity, stabilize cash flow, and outsource credit control, but they can affect operating margins and customer relationships. They are governed by commercial law and may be subject to financial regulation depending on jurisdiction.