Factoring is the selling of debtors' debts to Swedbank Lizings with the aim to obtain additional current assets and to improve the cash flow.
If the company sells goods under deferred payment and therefore the money is frozen for the period until the buyer pays, factoring is the best solution.
Finance can be made available for up to 90% of the invoice made by the customer to the seller, and the invoice is assigned to Swedbank Lizings for the full amount, and the finance is paid off when the money is received from the buyers on the due date.
The buyer can be located in Latvia or abroad.
The factoring service may be useful also if there is a need to offer your buyers longer payment periods. Factoring is usually opted for by retailers and producers that sell their goods in the domestic market and by exporters that in addition to current assets need also protection against buyer insolvency risk.
- Audited last year’s report and balance sheet and loss/profit statement of last quarter
- Purchase/sales agreement under which invoices will be made to the buyer
Advantages of Factoring
- Money for the goods sold can be received swiftly, without waiting for payment from the buyer
- Protection against the risk of insolvency of foreign buyers, which means that your business will be securer
- Swedbank Lizings collects the money and monitors the buyers’ payment discipline, which means that you will have more time for your main business
- Improved competitiveness because you will be able to offer more flexible payment conditions to your customers
- Improved purchasing power because your company will have more free money
- No additional collateral is required for factoring finance
- Convenient and swift exchange of information: factoring reports that are available for free on Swedbank’s online banking facility for businesses, where the current status of the factored invoices and fees calculated can be viewed at any time. All reports are available in PDF and XML formats, which are suitable for importing the data to accounting systems
What changes does the factoring service mean for the buyer and the seller?
When the factoring agreement is made with Swedbank Lizings, the customer continues to make invoices for goods to the buyers. In every invoice a reference is made that the invoice has been assigned; it is information about the assignment of the right to claim and the payment procedure: that the invoice is to be paid to the account of Swedbank Lizings.
Swedbank Lizings, having received the invoice, makes an advance payment (usually up to 90% of invoice amount) to the customer. On the invoice payment date, the buyer pays the entire invoice amount to Swedbank Lizings, which transfers the remaining 10% of the invoice amount to the customer.
What is recourse factoring?
Under a recourse factoring agreement: if the buyer is unable to pay an invoice financed by factoring, Swedbank Lizings returns the right to claim under the invoice to the seller and the seller returns the finance received for the invoice to Swedbank Lizings.
What is non-recourse factoring?
Under a non-recourse factoring agreement: if on and after the payment date of the financed invoice the buyer is insolvent or unable to pay the invoice for a longer time, Swedbank Lizings will compensate up to 85% of the invoice amount to the seller.
Usually non-recourse factoring is used in export transactions.
What is the minimum transaction amount for factoring?
The amount of every individual transaction (invoice) is not important. What is important is the total factoring limit amount, which is calculated by summing up the amounts of invoices in the granted deferred payment period. To get access to all the advantages of factoring, the most suited minimum factoring limit is LVL 15,000.
What transactions factoring is not suited for?
Factoring is not a means of debt collection and it may not be used if the buyer defaults payments. The buyer’s payment history must be positive.
What is assessed when the factoring application is examined?
When the factoring application is examined, not only the seller but also all the buyers will be evaluated. Also, the agreement between the buyer and the seller will be evaluated.