F.A.Q

What is Factoring?
It is a transaction of mediating the collection, issuing guarantee, or providing finance in return to amounts receivable which have arisen or will be arisen from the sale of goods and services.

Who can benefit from factoring services?
Natural or legal persons which/who produces and sells goods/services can benefit from factoring services.

What is legal foundation of factoring?
While Factoring companies which require to be established as Incorporations were subject to the monitoring and control of Undersecretariat of Treasury within the scope of “Statutory Decree regarding Loan Business Number 90” before, and later they were subject to monitoring and supervision of Banking Regulatory and Supervisory Agency according to Banking Law Number 5411, they have now gained a unique legal structure with “Financial Leasing, Factoring, and Financing Companies Law” Number 6361 with the date 21/12/2012 and related regulations.

What is the difference of Factoring from bank loans which are available in return to check-bonds?
In bank loans in return to check-bonds, the used check or bond forms a guarantee for the used loan and continue to be monitored as receivables with bond in the assets of your balance sheet, but it is shown in the financial liabilities section of liabilities. However, in factoring transaction, check/bond directly represents the receivable related to the invoice. Receivable amount which is assigned or transferred is removed from receivables with bond in balance sheet and transformed into cash and is not shown in financial liabilities section.

Which services are provided by Factoring?
Financing: It is the activity of paying some proportion of receivable amount, which is transferred by customer to Factoring company, to seller company before the maturity date. Prepayment rate is determined in relation to the maturity of receivables which were transferred, business volume and credibility of the receivables.
Guarantee: It is the status of debtor’s nonpayment risk being undertaken by factoring company within the scope of factoring agreement. In irrevocable factoring, the nonpayment risk of receivable is undertaken by factoring company within the limits and conditions determined at the beginning.
Collection: It is the provision of the follow-up of the receivable on its maturity, the collection of receivable and related reporting by factoring company to customer.
Customers can benefit from these services as a whole or separately according to the scope of factoring company’s services.

Which receivables are not suitable for factoring?
Generally, investment goods, perishable goods and receivables arising from downstream transactions are not suitable for factoring.

What are the costs in Factoring?
There are two main costs in factoring: Factoring commission and factoring fee.
Factoring fee: In the event of benefitting from financing services, it is the interest amount that factoring company takes in return to prepayment it provided.
Commission: It is a cost calculated over transferred receivables and changes according to the maturity of receivable and business volume.
The fees (such as mail, transfer, EFT etc.) which are taken by factoring company except factoring fee and commission are taken as expenses.  
Incomes such as commission, fee, and expenses taken in return to factoring services are subject to BSMV (Banking and Insurance Transaction Tax). However, Factoring fee, commission, and expenses which bring foreign currency to Turkey are exempt from BSMV.

What kind of transaction I can make in ABC Factoring?
If you would like to turn your future receivables which are represented with a document such as invoice or similar to invoice into cash, please make contact to our customer representative by applying to our closest branch office or our Headquarters Address stated in the “contact us” section.   

What are the documents required from Companies?
Application and the documents stated in Required Documents section must be submitted to our company before implementing factoring transaction.

What are the services provided by Factoring?
Financing: It is the activity of paying some proportion of receivable amount, which is transferred by customer to Factoring company, to seller company before the maturity date.
Guarantee: It is the status of debtor’s nonpayment risk being undertaken by factoring company within the scope of factoring agreement.
Collection: It is the provision of the follow-up of the receivable on its maturity, the collection of receivable and related reporting by factoring company to customer.

How is the prepayment rate determined in Factoring transactions?
Prepayment rate is determined in relation to the maturity of receivables which were transferred, business volume and credibility of the receivables.

What are the types of factoring?
Full Service Factoring
It is a traditional factoring type that is commonly used. Factor accepts to take all invoice receivables arising from normal commercial relations, to collect receivables, to keep the receivable records and to make prepayment with a continuous agreement between seller company and factoring company. These factoring services are classified into two groups according to whether factoring company undertakes the risk of receivables regarding not being collected.
Revocable (Recurrent) Factoring: Factoring company does not undertake the nonpayment risk of debtor, and reserves its right to revoke to customer.
Irrevocable (Without Recourse) Factoring: These are the transactions in which factoring company undertakes nonpayment risk of debtor within the principled of factoring agreement. The cases of conflicts which may arise from the main relationship between debtor (buyer) and customer (seller) or other reasons are not within the scope of guarantee.
Collection Service
It is a factoring type that does not include prepayment. The main principle in these agreements is the services of collecting the receivable and keeping the records of sales. If parties agrees, the state of factoring company undertaking the nonpayment risk of debt can be included into these kind of factoring transactions. Factor pays the receivable to seller within a mutually agreed period after the invoice date.
Invoice Discount
It is a factoring type that generally provides only financing service. It is an approach implemented for companies who need financing but do not need protection against nonpayment of debt and receivable management. Here, it may not be notified to debtor that the receivable is transferred to a factoring company, and the collection of receivables transferred by seller to factor is made on behalf of factor by seller company again. This is implemented in two methods:
Pre-notified Factoring: It is a factoring type that receivable transfer is notified to debtor.
Factoring Without Notice: It is a factoring type that the fact of receivable being transferred to factoring company is not notified to debtor. Customer (seller) collects from debtor and pays them to factor. (Factor’s transfer, notification and collection rights are reserved.)

What are the fees collected for factoring transactions?
Commission: Fee that factoring company takes from customer in return to services it provided.
Factoring Fee (Interest): Interest amount that factor takes in return to prepayment it provided.
Expenses: These are the amounts taken by factor except factoring fee and commission (mail, transfer, EFT etc.).
BSMV: Incomes such as commission, fee, and expenses taken in return to factoring services are subject to BSMV (Banking and Insurance Transaction Tax). Factoring fee, commission, and expenses which bring foreign currency to Turkey are exempt from BSMV.
Financing with Factoring and its Advantages
Factoring is to provide finance and collection services in return to transferring of future amounts receivable based on invoices or documents substituting for invoice which have arisen or will be arisen from all kinds of sale of goods and services. Companies benefit from financing (cash management), collection management services according to the services they have selected within the scope of factoring. The advantage obtained from factoring increases in parallel with the selected service/services.
Advantages of Factoring
- Since financing service provided by factoring is based on the transfer of commercial receivable, it is fast and solution oriented compared to bank loans.
- Factoring turns future receivables into cash with cash management and enables the raw materials to be bought in cash and costs which will arise from the setback of production to be decreased. While production efficiency increases business volume and profitability, it helps the need for external resources to decrease gradually.
- Receivable management services provided within the scope of factoring increase competitive power of companies with redemption date advantage they provide, and support the growth of market share and development of quality standard.
- Cash management enables cash flow plans to be more organized and realistic.
- By means of reliable intelligence, the latest information are obtained regarding the status and efficiency of buyer and future collection problems are prevented. In summary, factoring supports an efficient and realistic risk management.

Who can benefit from Factoring?
All companies that produce goods and services, that’s to say all companies which implement short-term trade, can benefit from factoring service. Undue, invoiced receivables which arise from the sale of goods and services based on trading activities can be turned into cash by means of factoring.

How does factoring system work?
There are three parties in a factoring transaction with future sale.
Buyer (debtor), seller, and factoring company.
After buyer has notified its order to seller, seller company transmits the information of the buyer to factoring company. Factoring company investigates the credibility of buyer and informs the seller about the conditions and limit which can be allocated to seller. A contract is drawn up between buyer and seller, the products are sent. Seller sends a copy of invoice which it sent to buyer to factoring company. Factoring company makes a prepayment to seller within the scope of determined rates within the frame of contract. Factoring company collects the invoice amount from buyer on maturity date and pays to seller the remaining amount.

What is the advantage of factoring transaction in my balance sheet?
ın factoring transactions, check & bond directly represent the receivable regarding the invoice and are transferred to factoring company by assignment. The transferred amount is removed from receivables with invoice in assets section and turned into cash and is not shown in financial liabilities section, thus your company gains a liquid view. However, in bank loans, the bonds form a guarantee of the loan provided and continue to be monitored in the receivables with invoice section of assets in balance sheet by being transferred to banks with restricted endorsement. The used loan in return to that is shown in financial liabilities section of the liabilities.

If the goods stated in the invoiced receivable is defective, is the guarantee removed?
One of the most important reasons in removal of guarantee is that the goods being defective or a different goods being sent to buyer instead of the one the buyer ordered before. In addition to that, fulfilling limit allocation conditions, complying with international factoring principles, complying with the principles of contract drawn up with buyer company or principles of order requirements are mandatory for the validity and continuity of guarantee.

In the case of receivable not being paid, how are the legal proceedings implemented?
This subject depends on the agreement between customer and factor. Proceedings can be implemented by customer or by factoring company at customer’s expense