faktoreerimisele

Faktoreerimisele is an Estonian term that translates to "factoring" in English. It refers to a financial transaction in which a company sells its accounts receivable to a third party, known as a factor, at a discount. The factor then assumes responsibility for collecting the outstanding invoices from the company's customers. This practice is a form of invoice financing, allowing businesses to obtain immediate cash flow by liquidating their unpaid invoices.

Companies typically use faktoreerimisele to manage their working capital, especially when they have long payment terms with their clients or experience seasonal fluctuations in revenue. By selling their receivables, businesses can access funds quickly, which can be used for operational expenses, payroll, inventory purchases, or to take advantage of new business opportunities. The discount rate charged by the factor varies depending on factors such as the creditworthiness of the company's customers, the volume of receivables, and the agreed-upon terms.

There are generally two main types of faktoreerimisele: recourse and non-recourse. In a recourse arrangement, the company remains liable for any uncollectible invoices. If a customer fails to pay, the company must buy back the invoice from the factor. In a non-recourse arrangement, the factor assumes the risk of non-payment. This type of factoring is usually more expensive due to the increased risk for the factor. Faktoreerimisele can be particularly beneficial for small and medium-sized enterprises that may have difficulty securing traditional bank loans.