Quasi-factoring

What is Quasi-factoring?

Quasi-factoring is a type of financial factoring that operates slightly differently from traditional factoring. It is a solution for businesses that need cash flow but might not qualify for conventional factoring services or are looking for more flexible terms.

How Does Quasi-factoring Work?

Unlike traditional factoring where a company sells its invoices to a factor, in quasi-factoring, the factor does not assume the credit risk of the debtor. Instead, the factor advances a portion of the invoice's value to the business. The key difference lies in the responsibility for the collection of the debt. If the debtor fails to pay, the business must repay the advanced funds to the factor.

Benefits of Quasi-factoring

This method provides several benefits. Firstly, it can increase liquidity by providing immediate access to cash. Secondly, as quasi-factoring does not transfer the credit risk, businesses maintain control over their customer relationships and debt collection processes. Lastly, it may be more accessible to businesses that do not have a long credit history or those with customers who have less than perfect creditworthiness.

Considerations for Quasi-factoring

When considering quasi-factoring, businesses should be aware of the costs and terms involved. Since the factor does not take on credit risk, the fees may be lower than in traditional factoring. However, companies must have a reliable process for debt collection, as they bear the risk of non-payment. It's essential to evaluate the creditworthiness of customers and understand the contract terms with the factor thoroughly.

Is Quasi-factoring Right for Your Business?

Quasi-factoring can be an excellent financial tool for companies that need working capital but want to retain credit control. It suits businesses with strong debt collection capabilities and those not wanting to impact the customer relationship. Assess your cash flow needs, customer base, and internal debt collection proficiency to decide if quasi-factoring is suitable for you.