Download Factoring

Factoring, Forfaiting and
Leasing as Nontraditional
Forms of Foreign Trade
Financing
FEM, MPA
2nd year,
2007/2008
Martina Horňáčeková
Andrea Králiková
Factoring
 The way of financing short-term
claims (14-180 days)
 An attractive alternative to raising
equity for small innovative
fast-growing firms
 The three parties directly involved are:
the seller, debtor, and the factor.
 The seller is owed money (usually for work
performed or goods sold) by the second
party, the debtor.
 The seller then sells one or more of its claims
at a discount to the third party,
the specialized financial organization (the
factor) to obtain cash. The debtor then
directly pays the factor the full value of the
claim.
2 kinds of factoring
 Domestic
 Exporting
Types of factoring







Real factoring
Unreal factoring
Full factoring
Confidential factoring
Silent factoring
Obvious factoring
Exporting factoring
Advantages
» The factor carries the risk of not paying the
obligation
» The businessman does not have administrative
duties, e.g. evidence of claims
» Financial covering of seasonal costs, e.g.
seasonal selling, advertising or company's
expansion
» Getting better conditions thanks to the faster
paying of supplier
Functions
 Financing function
 Function of providing services
 Insurance function
 Cash function
Who is the appropriate
addept for factoring?
Firms and bussinessmen
 always the same customers
 the cooperation lasts at least one year
 you regularly supplies at least three
customers
 your supplies are highly seasonable
 your company can not finance the orders
itself
Forfaiting
 flexible opportunity of financing
 purchasing long-term and middle-term
claims (1-10 years) by bank or forfaiting
institution
 claims are connected with export of goods
and services without back affect of the
supplier
 purchaser of a claim = FORFAITER
(usually bank or forfaiting institution)
 min. value of the claim – 1 000 000
SKK
 claims connected with investment
activity – export of machines, means of
transport, equipment...
 mostly used by exporters who need cash
instead of the claim
 possible to use forfaiting in home trade
as well
Evolution of forfaitig
 started in 50´s – 60´s of 20th century in
Switzerland
 70´s- the 1st contact with the Slovak banking
system
 90´s – forfating in Slovakia in fully range
 ČSOB
 in Slovakia – claims usually connected with
international trade
 forfaiting – bigger risk than factoring
– each claim is carefully considered
(credibility of the debtor, country,
maturity date, form of assurance,
awaited evolution of interest rates,
political situation...)
 the price is set by banks individually
 set for legal entities
Advantages of forfaiting
 it influences cash-flow of the exporter
positively
 foreign claims – only in stable currencies
 simple documentation and administration of
business case
 individual consideration of each claim
 taking over the risk (economic risk, risk of
the country, political risk, currency risk) by
the forfaiter
Differencies
FORFAITING
FACTORING
 long-term claims
 short-term claims
 a claim must come into  a claim can be purchased
existence at first, then it before its existence
is purchased
 block of claims is
 single claims are
purchased
purchased
 a guarantee is seldom
 a guarantee is required required
 no additional servicies  additional servicies
connected with a claim connected with a claim
are provided
are provided
Leasing
 lease = hire, lend
 Special form of getting and financing
goods
 Fixed regular payments
When doing a leasing contract
Two parties: the person who leases
(leaser) and leaseholder
4 categories of leaser:
Leasing companies
Banks and financial institutions
Branches of goods producers
Combined firms
The principal
 The leaser leases the leaseholder
a certain article for using
while the leaser remains the owner
of the article, or the rights are taken
over by the leaseholder
The history
 1877 - American company Bell
Telephone Company decided not to sell
but hire the telephones
 1952 - the first leasing company in USA
 At the beginning in car business
Two types of leasing contracts
 Financial
long-term lease
 Operative
short-term lease
 The property
 The leased article
rights gains the
remains in
leaseholder after
property of the
finishing the lease
person leasing it
Advantages
For the leaseholder For the leaser
 No loan conditions
 No investment
restrictions
 It covers almost 100%
of costs
 Provides yields in cash
 Enables diversification
of business risk
 Can get back the article
when the leaseholder
does not fulfil the
agreed conditions
 Tax regulations
Thank you
for the attention