International Factoring
From Supply Chain Management Encyclopedia
Russian: Международный факторинг
International factoring is a means of financing international receivable accounts, by which a firm can ask a factoring company (factor) to advance funds on a receivable account. However, there is no universal definition of factoring. In different parts of the world factoring has been defined in different ways. The conference of International Institute for Unification of Private Law[1] (UNIDROIT) on factoring held in May 1988 defines that factoring is an arrangement between a factor and his client which includes at least two of the services as
- (a) finance
- (b) maintenance of accounts,
- (c) collection of debts and
- (d) protection against credit risks.
One could also define the factoring as a purchase of receivables by factor from its client and collect it during the maturity from the debtor[2]. Usually the factor pays the client about 80% of the value of the receivable and remaining is paid by collecting from the debtor after the deduction of charges. There is Domestic Factoring and International Factoring.
References
- ↑ http://www.unidroit.org/about-unidroit/overview
- ↑ Mizan, A. N. K. Factoring: a Better Alternative of International Trade Payment Methods // ASA University Review, Vol. 5 No. 2, July–December, 2011 - http://www.asaub.edu.bd/data/asaubreview/v5n2sl18.pdf
