Factoring operations of the bank: their essence and mission

For twenty years, factoring operations have been conducted in our country. They represent a purchase-sale transaction from a supplier who is concurrently a creditor, the right to receive a debt from the borrower. Objects of such relations may be goods or services, as well as securities, payments on which have not yet been made.

Factoring operations are beneficial to all parties to the transaction, since they allow the supplier to get debt now, though not in full. A contract is concluded between the bank and the creditor, according to which the former pays the debt of the buyer at a rate of 80-90% of the total amount and gets the right to collect the debt in full in the future. The economic profit of a credit institution is a difference of 10-20%, called a discount. In some cases, the terms of the contract assume full recovery of the debt to the creditor, and the bank in turn receives a commission fee, the amount of which is stipulated in the bilateral agreement.

Factoring operations of the bank can be classified by type. One of the most common is internal factoring, that is, the operation to acquire the right of claim of residents of the country. If one of the participants in the transaction is a citizen of another state, then we can talk about the international form. With an open factoring transaction, the borrower will be notified of the transfer of rights to recover the debt in favor of the bank. A confidential or hidden form is carried out without the debtor's knowledge of the transfer of rights of claim. Such a deal will cost much more. The payer transfers funds in the amount of debt to the client's settlement account, which then gives the bank money in the amount established by the contractual agreement.

In practice, divide factoring operations with the right of regression and without it. According to the first type, the bank can cancel the deal with the supplier and return it the rights of claim in the event of the refusal of the buyer to repay the debt. If an operation is performed without the right of recourse, the factor can not require the lender to return unpaid debt. Of course, in most cases, preference is given to the first type of transactions, since this reduces the level of bank risk. As a rule, non-recurring transactions are conducted when the borrower is a solvent legal entity with a stable financial position.

Factoring operations of commercial banks are becoming more widespread, since they allow to compensate for temporary shortage of circulating assets in the current activity of economic entities. And in conditions of inaccessibility of credit, for example, when banks are denied for one reason or another, factoring becomes a kind of panacea that allows you to save your own funds. But the credit institution does not always agree to the conclusion of such a transaction. When reviewing an application, the bank's management carefully examines the solvency of the debtor, its credit history, product demand in the market and the possibility of its sale in a short period of time. A lot of laborious and ambitious work is being done, and this shows the similarity of factoring and credit.

Often a bank is forced to refuse a supplier if the borrower has large debts to different creditors or in the event of speculative activity. Also, factoring companies do not risk acquiring the rights of claiming debts from a legal entity that produces non-specific goods or that has a focus on a narrow audience of consumers.

Factoring operations in the modern financial market of our country are conducted in almost the same volume as in European markets of international scale. And this attracts more foreign investors who have large amounts of money than, unfortunately, domestic producers can not boast of.