factoringyhtiö

A factoringyhtiö, or factoring company, is a financial institution that provides businesses with a way to access immediate cash flow by selling their accounts receivable, or invoices, at a discount. Essentially, a business sells its outstanding invoices to the factoring company. The factoring company then pays the business a percentage of the invoice value upfront, typically 70-90%. Once the customer pays the invoice, the factoring company collects the full amount and remits the remaining balance to the business, minus its fees.

Factoring can be a valuable tool for businesses, particularly small and medium-sized enterprises, that need working capital to manage day-to-day operations, meet payroll, or invest in growth opportunities. It can also help businesses that experience long payment cycles from their customers. The primary benefit is improved liquidity and a reduced risk of bad debt, as the factoring company often assumes the credit risk.

There are different types of factoring. Recourse factoring means the business remains liable for the invoice if the customer doesn't pay. Non-recourse factoring, which is usually more expensive, transfers the credit risk to the factoring company. Factoring can be confidential, meaning the customer is unaware of the arrangement, or disclosed, where the customer is informed that payments should be made to the factoring company. The fees charged by a factoringyhtiö vary based on factors such as the volume of invoices, the creditworthiness of the customers, and the length of payment terms.