Improvements for the Company : Factoring for You

As an entrepreneur, you may have heard that factoring could be the solution to all your financial problems. But factoring is not just factoring. Be it a small business, a small business or a self-employed person, so that you know which type of factoring is right for your company, in 5 minutes we will explain everything you, as a freelancer and small business owner, need to know about factoring and its various types.

On the fly – Table of contents:

  • Definition – What is this factoring anyway?
  • Types – factoring is not equal to factoring
  • Advantages and disadvantages – What should be considered when factoring?
  • Which factoring is right for my company?

Expiration – That’s what you expect in the factoring process

Examples – Factoring helps different companies

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What is this factoring?

For an entrepreneur, factoring simply means exchanging an unpaid bill for money. If you have issued an invoice to your customer, he must pay for it within a certain period of time. By law, there are 30 days, but this period may vary. No matter what time you choose to settle with your customer, you’ll have to wait days, if not weeks, for your money. Factoring companies, or so-called factors, come into play here. With them, you can submit your unpaid bill and get your money paid out within a few hours. Depending on what kind of factoring you choose, your work is done with it and you can continue working worry-free. Now let us know more regarding factoring companies now.

The Basics – factoring simply explained

  • Factoring is the exchange of your unpaid bill for money
  • Factoring is also called “invoice pre-financing”

Types of factoring – Genuine and fake factoring

Now the question arises, if you have already received your money from the factor, where does the money of your customer go if he pays the bill?

Here Factoring splits into its two main types

Genuine factoring refers to the “sale of receivables” to the factoring company. This means that as an entrepreneur you completely surrender your claim. If your customer does not pay the bill, the factor has to deal with reminders and debt collection procedures. You have already received your money and can sleep soundly. German companies usually use genuine factoring.

False factoring always exists when you have to pay back the money received from the factor. The factor does not contact your customers at any time. You continue to bear the risk of default by the customer. This variant seems risky at first glance, but fake factoring certainly has its advantages over genuine factoring.

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