Factoring
Factoring is the financing of the company’s assets against the possible debts.
In case of factoring the company assigns the debts to Nordea Finance, receiving the immediate advance payment. The buyer pays to Nordea Finance within payment terms defined by the seller. This service is used by the companies-sellers to avoid freezing of assets on hand or in cases when the seller needs to offer the customers longer repayment terms for the sold goods or services.
Factoring includes three services
1. Financing
2. Administration of bills
3. Covering debtor's risks
Factoring offer
| Term of agreement | 1 year (possibility to prolong the agreement) |
| Percent + one week BOR rate, Nordea base rate | + 2 – 5% |
| The minimal limit for buyer | 3 000 Lats |
| Maximal payment term of the invoice | 90 days |
| Currency of financing | LVL, EUR, USD, GBP, SEK, DKK |
The economic gain of the factoring
The gain of the seller
- Improved liquidity of the company
- Company's liquidity is achieved with the help of credit that does not need additional guarantees and provision
- Improved purchasers payment discipline
- Eased planning of the money flow
- Rise in the sale amounts
- The resources are not spent for administration of the purchaser’s debts
- Effective money return due to lowering the specific weight of the unpaid bills
- Opportunity to offer the purchasers longer terms of payment
The additional gain of the seller - exporter
- Possibility to offer purchasers better repayment conditions based on the previous credit history
- Coverage of possible losses that may arise due to the delays in the money flow or the possible bankruptcy of the purchaser
- Consultations regarding state legislation, payment regulations and other important information that is connected to the purchasing and selling deals
- Flexible credit conditions for increasing the export turnover
The gain of the purchaser
- Better regulations for repayment
- More purchasing power, because no credit is needed
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