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Factoring for SMEs – The basics

Factoring enables companies to convert outstanding accounts receivable into cash at an early stage. In this process, a business sells or assigns its receivables from goods or services to a factoring company (factor) and, in return, receives immediate liquidity. The factor typically also provides additional services such as receivables management and credit risk management,

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Factoring components:

  • Receivables financing: The factor takes over your receivables and provides you with an advance payment, typically around 80% of the invoice amount.
  • Receivables management: The factor handles your receivables accounting, including dunning and collections. However, invoice creation and dispatch remain the responsibility of your company.
  • Receivables protection: Through external credit insurance, the factor reduces the risk of default. This provides your company with greater payment security.

Types of factoring:

  • True factoring: The factor assumes the full default risk.
  • Recourse factoring: Default risk remains with the company.

Advantages of factoring:

  • Rapid liquidity thanks to an immediate advance payments
  • Protection against losses on receivables
  • Improvement of balance sheet ratios (reduction of receivables position)
  • Cost savings through variable administrative expenses instead of fixed expenses
  • Ability to take advantage of early payment discounts thanks to improved liquidity

What kind of business is factoring suitable for?

  • Young or rapidly growing businesses with a low capital base
  • Export-oriented companies
  • Companies with solid, high-quality receivables
  • Companies with liquidity requirements to finance growth
  • Companies looking to outsource time-intensive debtor management

How to proceed – Step by step to your factoring solution

1

Requirement analysis

  • We analyze your liquidity needs and examine your current debtor situation.

2

Selection of the factor

  • We identify an optimal factoring partner and compare various offers with regard to costs and benefits.

3

Negotiation of conditions

  • We handle negotiations and secure advantageous conditions for you, particularly in terms of advance ratio, fees, and services.

4

Implementation and care

  • We accompany you in setting up the factoring process and ensure that all contract terms are implemented correctly.

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smzh for you – Your advantages at a glance:

  • Access to established factoring providers: Benefit from our network.
  • Optimized liquidity: Rapid conversion of receivables into cash.
  • Reduced default risks: Significantly lower receivables losses through credit insurance.
  • Reduced administrative workload: Relief through outsourced receivables management.
  • Planning certainty: Transparent and fair terms for reliable financial planning.

We look forward to providing a consultation and answering any questions regarding factoring solutions you may have. Contact us and learn more about how factoring can help your business grow effectively.

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    Fees typically range between 0.5% and 1.5% of the invoice amount depending on creditworthiness, transaction volume, and the number of invoices.

    In principle, all high-quality accounts receivable arising from the sale of goods and services – especially those from stable and solvent customers – are eligible.

    In true factoring, the factor assumes the full default risk. In recourse factoring, the default risk remains with the company.

    Yes, factoring is particularly suitable to safeguard and finance export receivables.