Due date factoring is a service provided by factoring companies. These companies act as a factor towards their clients and customers. In the case of due date factoring, the client takes advantage of the complete protection against the risk of default. In addition, factoring service providers relieve the client of the burden of accounts receivable management. The special feature of this form of factoring is that the receivables are taken over by the factor, but the client waives the right to immediate settlement of the purchase price.
Advantages of maturity factoring
One advantage of due date factoring is that it relieves the customer of the burden of accounts receivable management. Depending on the agreement, the factor takes over the receivables and thus the dunning and collection process partially or even completely. In the course of this, in the case of open factoring, the debtor is informed that the factoring company has purchased the receivables and that payments must be made directly to the factor. In addition, in the case of due date factoring, the default risk is completely secured for the customer with the del credere protection. The decision in favour of this form of factoring is often also a question of cost. This is because, in contrast to traditional factoring, there are often no pre-financing costs. It is important to note, however, that this eliminates liquidity advantages with regard to the balance sheet. Maturity factoring therefore does not have any positive impact on ratings and creditworthiness.
Factoring: trade credit insurance and other services
In principle, trade credit insurance is a common means by which companies protect themselves against the risks of non-payment. The special feature of due date factoring is that the del credere risk is assumed by the factoring company. Another interesting aspect for customers is that the providers offer additional services that traditional providers such as insurance companies or banks do not provide. The costs of maturity factoring can vary greatly. This so-called factoring fee is influenced, among other things, by the amount of the receivables, the scope of the services and individual cost and benefit parameters that can be set by the factor.
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