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Factoring program

Factoring Program

A factoring program is a financial arrangement in which a business sells its accounts receivable (invoices) to a third party, known as a factor, at a discount. This allows the business to receive immediate cash, rather than waiting for the payment terms of the invoices, which could be 30, 60, or even 90 days. The factor then takes on the responsibility of collecting payments from the customers. Factoring programs are often used by companies to manage cash flow, particularly for businesses in the energy commodities trading sector where capital demands can be intense and unpredictable.

The factor charges a fee for this service, which is a percentage of the invoice value, and assumes the credit risk associated with the accounts receivable. Depending on the arrangement, factoring can be “with recourse,” where the business is responsible for buying back any unpaid invoices, or “without recourse,” where the factor assumes all of the risks for collecting the receivables. Factors often provide additional services such as credit checks on customers and accounts receivable management.

For more information about factoring programs, you can visit the following websites:

1. International Factoring Association (IFA) – The IFA is one of the largest associations of commercial finance companies in the world and provides resources, education, and networking opportunities for the factoring community.

Website: https://www.factoring.org

2. Factors Chain International (FCI) – FCI is a global network of factoring companies, offering information about factoring services worldwide, including education and guidelines for best practices in the industry.

Website: https://fci.nl/en

Please note that web addresses can change or pages may become unavailable over time. It is always suggested to use a search engine to find the most current and relevant information about factoring programs if the provided links are not working.

This A.I.-generated glossary is intended to provide a convenient means to understand terminology used on this website in the context of physical commodities trading. Some terms may have alternative and/or expanded definitions that may not be relevant here and thus not included. Sources provided are for reference and not intended to be an endorsement of the broader content on that website. Suggestions, questions, or corrections can be provided in the comment box on definition pages.

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