factoringyhtiölle

A factoring company, or factoringyhtiö in Finnish, is a financial institution that purchases a business's accounts receivable at a discount. This service, known as factoring, provides businesses with immediate access to cash that would otherwise be tied up in outstanding invoices. The factoring company then assumes the responsibility of collecting the full payment from the business's customers.

The process typically involves a business selling its invoices to the factoring company. The factoring company pays the business a percentage of the invoice value upfront, usually between 70% and 90%. Once the business's customer pays the invoice in full, the factoring company then remits the remaining balance to the business, minus a fee for their services. This fee is often a percentage of the invoice value or a set rate.

Factoring is a valuable tool for businesses, particularly small and medium-sized enterprises, that need to improve their cash flow. It can help cover operational expenses, invest in growth, or manage seasonal fluctuations in revenue without the need for traditional loans. It also shifts the burden of credit risk and collections to the factoring company, freeing up the business's resources. Different types of factoring exist, including recourse factoring, where the seller retains some risk if the customer defaults, and non-recourse factoring, where the factoring company assumes the full credit risk.