Factoring is a financial solution that allows companies to receive advance payment for invoices or other receivables.
It works when a company sells its invoices to a bank or financial institution specialising in factoring (the factor), which purchases the invoices at a discount, advancing part of the amount — usually between 70% and 90%. When the customer pays the invoice, the factor transfers the balance (30% to 10%) to the company that sold it, minus the agreed discount and any fees for the service provided.
In this way, the selling company obtains capital to finance its operations, while the factor profits by receiving the full amount of the invoices from the debtors when they pay, which is more than what it paid for the purchase of the invoice.
Factoring can be:
Non-recourse, when the risk passes to the factor. If the customer does not pay, the company that sold the invoice is not obliged to assume the debt and repurchase the invoice. In this case, the responsibility for collecting the invoice necessarily passes to the factor.
With recourse, which means that, despite the sale of the invoice, the risk of non-payment remains with the company, and if the customer does not pay, the company must assume the debt by repurchasing the invoice;
In the traditional model, factoring is offered by banks or specialised financial institutions, which purchase large volumes of invoices (usually of high value) and may require complex contracts and additional costs. However, the characteristics and terms of factoring may vary depending on the country and the negotiations between the parties involved.
At Daskapital, crowdfactoring makes this process simpler and more accessible: it allows companies to choose which invoices they want to advance, without compromising their entire customer portfolio, and allows investors to finance these invoices directly, with complete transparency.
