Do you know what factoring and confirming are? Learn the differences
Posted: Sun Dec 15, 2024 9:43 am
We explain in detail the difference between factoring and confirming.
Learn the differences between these two sources of financing, as well as their advantages and disadvantages.
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What is factoring?
Factoring with or without recourse
Advantages of factoring
Disadvantages of factoring
What is confirming?
Confirming with or without recourse
Advantages of confirming
Disadvantages of confirming
Difference between factoring and confirming
The factoring and confirming sector continues to grow. According to the Spanish Factoring Association (AEF), in the first half of 2022 it experienced a growth of 26% compared to the same period of the previous year.
One of the main keys to choosing how to finance your company's operations is the repayment period for the financing granted. Therefore, the first thing you should know about factoring and confirming is that they are tools for financing yourself in the short term .
Start of marked textSHARE! Do you know the difference between factoring and confirming? We show you the keys to choosing between these two sources of financing.End of marked text
1)What is factoring?
Factoring is a short-term financing tool that allows companies and self-employed individuals to pay their outstanding invoices in advance . Therefore, whenever a company has commercial credits derived from outstanding invoices , it can factor them and obtain financing.
This is a financing formula widely used by SMEs clinics email list to finance their operating cycle . To implement it, financial institutions make commercial credit advance lines available to companies and self-employed workers. Thanks to these lines, payment of outstanding invoices can be anticipated.
2) Factoring with or without recourse
Factoring can be done with or without recourse.
Recourse factoring : when the invoices of the drawees are transferred to the bank, the company that factors its commercial credits assumes the risk of non-payment. If the drawees do not pay, the bank charges this amount to the company that has advanced the collection of its invoices.
Non-recourse factoring : in this case the bank or factoring entity carries out a study of the invoices assigned to it in order to anticipate their collection, since they assume the risk in the event of non-payment.
3) Advantages of factoring
Among the advantages of factoring we can highlight the following:
Speed . It is a quick way to obtain short-term financing. It does not require many formalities, since in factoring the operation is supported by an invoice pending collection for the sale of goods or the provision of services . To advance the amount, you only need to send a file in SEPA format with the invoices you want to advance and have an advance line opened by the financial institution.
Flexibility. It allows companies to advance their commercial credits as they invoice. In addition, only a percentage of the billing or all of it can be advanced, depending on the financial needs of the company at any given time.
Learn the differences between these two sources of financing, as well as their advantages and disadvantages.
Post content
What is factoring?
Factoring with or without recourse
Advantages of factoring
Disadvantages of factoring
What is confirming?
Confirming with or without recourse
Advantages of confirming
Disadvantages of confirming
Difference between factoring and confirming
The factoring and confirming sector continues to grow. According to the Spanish Factoring Association (AEF), in the first half of 2022 it experienced a growth of 26% compared to the same period of the previous year.
One of the main keys to choosing how to finance your company's operations is the repayment period for the financing granted. Therefore, the first thing you should know about factoring and confirming is that they are tools for financing yourself in the short term .
Start of marked textSHARE! Do you know the difference between factoring and confirming? We show you the keys to choosing between these two sources of financing.End of marked text
1)What is factoring?
Factoring is a short-term financing tool that allows companies and self-employed individuals to pay their outstanding invoices in advance . Therefore, whenever a company has commercial credits derived from outstanding invoices , it can factor them and obtain financing.
This is a financing formula widely used by SMEs clinics email list to finance their operating cycle . To implement it, financial institutions make commercial credit advance lines available to companies and self-employed workers. Thanks to these lines, payment of outstanding invoices can be anticipated.
2) Factoring with or without recourse
Factoring can be done with or without recourse.
Recourse factoring : when the invoices of the drawees are transferred to the bank, the company that factors its commercial credits assumes the risk of non-payment. If the drawees do not pay, the bank charges this amount to the company that has advanced the collection of its invoices.
Non-recourse factoring : in this case the bank or factoring entity carries out a study of the invoices assigned to it in order to anticipate their collection, since they assume the risk in the event of non-payment.
3) Advantages of factoring
Among the advantages of factoring we can highlight the following:
Speed . It is a quick way to obtain short-term financing. It does not require many formalities, since in factoring the operation is supported by an invoice pending collection for the sale of goods or the provision of services . To advance the amount, you only need to send a file in SEPA format with the invoices you want to advance and have an advance line opened by the financial institution.
Flexibility. It allows companies to advance their commercial credits as they invoice. In addition, only a percentage of the billing or all of it can be advanced, depending on the financial needs of the company at any given time.