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FACTORING FORFAITING AND TReDS
What is factoring in the context of trade finance?
Factoring is a financial arrangement where a firm sells its trade receivables (invoices) to a third party called a factor at a discount in exchange for immediate cash, transferring the credit risk and collection responsibility.
What is 'full-service factoring' and what does it include?
Factoring with finance, sales ledger management, credit protection, and collection.
What is the primary difference between recourse factoring and non-recourse factoring?
In recourse factoring, the seller (client) bears the credit risk if the debtor defaults, whereas in non-recourse factoring, the factor absorbs the credit risk of non-payment by the debtor.
What is 'selective factoring' in trade finance?
Factoring only specific invoices chosen by the client, not all receivables.
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