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Factoring

What is factoring?

Factoring refers to the purchase of receivables arising from the delivery of goods or the provision of services, the assumption of the risk associated with the collectability of such receivables—excluding credit insurance—and, in connection therewith, the collection of such receivables. Any commercial conduct of factoring transactions constitutes a banking activity subject to licensing.

What is the difference between true and false factoring?

In true factoring, the factor (new creditor) assumes the risk of the debtor’s insolvency (del credere), and there is no guarantee that the receivable will be collectible. In the case of false factoring, the factor does not assume this risk. Since the factor typically pays the assigning creditor at least a substantial portion of the consideration immediately upon acquiring the receivable, factoring plays an important role in practice.

 

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