Frequently Asked Questions:
What differs factoring from the bill credits?
In bill credits, the issued bonds refer to a loan collateral whereas the bonds shall be followed up in bill credit receivables section under active assets of balance sheet upon restricted endorsement of relevant banks. The credit obtained according to this procedure shall be indicated on financial payables section of passive assets. However, the bonds represent a direct connection with the invoice in factoring transactions. The bonds shall be transferred to a factoring company through endorsement. The amount of assignable bond shall be excluded from the bond receivables section of balance sheet and liquidated accordingly. Such bonds shall not be indicated under financial liabilities.
How would I connect the receivables from open account customers with a factoring transaction?
Open account refers to the credit account without any bill of exchange (checks/bonds). The receivables from open account customers are transferred in advance to a factoring company through a factoring agreement corresponding to a transfer contract. Factor finalizes this transaction by receiving necessary approvals from the assignee on relevant debt without any restriction.
What are the expenses in a factoring transaction?
There are two expense items in factoring transactions classified accordingly to the transaction nature. First item refers to the commissions and expenses payable by the collection guarantee and/or the intermediation for collection. Second item is the interest rate payable through advance payment.
May I use factoring services even though I am not currently in need of financing?
Yes, you may. Financing function is just one of three options. The remaining ones are service and guarantee functions. It is possible to benefit from collection and/or guarantee functions without using financing function.
What are the terms for advance payments in factoring transactions and what are its rates?
In international factoring transactions, the advance payments are made over the receivables transferred to Factor and in maximum eighty percentage of total receivable. In domestic factoring transactions, the entire receivable amount is usually remitted by discount.
What are revocable and irrevocable factoring?
In an irrevocable factoring transaction, Factor undertakes the collection risk and relevant charges are not imposed on the customer in case of defective goods. In a revocable factoring transaction, Factor undertakes the payment risk and all advance payments remitted against relevant receivable are charged to the customer. The irrevocable factoring type is preferred generally in domestic transactions.
How a legal proceeding is initiated if any receivable subjected to factoring transaction fails to be remitted by relevant debtor?
This condition depends on the agreement between the customer and Factor. The follow-up proceedings shall be initiated by customer or by a factoring company at customers’ expense.
Should I have to transfer the entire amount of deferred receivables in order to receive factoring services?
No, any obligation is not available on this condition although it is possible to transfer all receivables in advance.
Should I need to issue invoices in order to receive factoring services?
It is required by applicable legislation that the receivables subjected to factoring should be supported with relevant invoices or similar documents. This should be interpreted as the essentiality of invoice. However, the receivables supported with the documents in place of invoices due to legal or technical requirements shall be subjected to the factoring transaction.
May I perform more than one factoring transaction with a single invoice?
In accordance with the directive issued by BRSA, you may submit a single invoice to more than one Factor by placing official seal or sticker indicating the institution details affiliated with the relevant amount used for factoring purposes. The stated seals/stickers shall be placed on the invoice copy received by your side. Factor is obliged to sign and keep a copy of the invoice including such sticker.
What type of documents are required to work with a Factor?
The required documents are authorized signatures list, trade registry gazette, certificate of activity, balance sheet for last 3 years, detailed balance sheet for current period, certified copy of identity card for partners or representatives exceeding 25%, certified copy of residence certificate for last 3 months issued for the declared address or current phone, water and electricity bills indicating the address details.