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F.A.Q.

What is factoring?

One of the oldest forms of commercial financing it is a financial transaction in which an entity sells its receivables (its outstanding debts) to a third party (the discount company), at an agreed discount rate, in exchange for immediate funds to carry out its business. In return, payment rights are transferred to the factoring company. The factoring parties are the seller/service provider, the buyer/beneficiary, and the discounter. 

Who can benefit from factoring services?

All companies with a term sale policy up to 180 days can benefit from factoring services. 

What are the advantages of factoring?

Local & International Collection Services Get down payment under billing account (up to 90% of invoice value instantly). 

Buyer's credit rating (on a periodic basis).

When is factoring the right solution?
  • Those who have restricted liquidity in the markets and in the securities portfolio
  • Those who are looking to improve their cash flow
Is factoring receivables the same as a loan?

No, factoring is not treated as a loan. When you factor receivables, you are selling an asset (invoices) rather than borrowing money. There is no debt to repay, and your creditworthiness is not a primary consideration we take consideration for creditworthiness of the company.

How long does it take to get approved for factoring?

The approval process can vary from one factoring company to another, but it is generally quicker than traditional loans. Some companies can approve and fund within a few days, while others may take a bit longer, at Awn we take from 48 72 hours to give approval.  

What happens if a customer doesn't pay the factored invoice?

If a customer doesn't pay, the factoring company may have recourse or non-recourse terms. In a recourse agreement, the business is responsible for repaying the factoring company if the customer defaults. In a non-recourse agreement, the factoring company bears the risk. 

Are there any disadvantages to factoring receivables?

Factoring can be more expensive than traditional financing options, and it involves giving up a portion of your invoice value as fees. Additionally, it may not be suitable for businesses with high-profit margins or those who don't want third-party involvement in their collections process.

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