Factoring without recourse

Factoring without recourse- a type of factoring, in which the risk of non-payment of the debt is assumed by the organization providing factoring services.

As in any type of factoring, the seller fulfills its obligations to supply or perform services by providing the buyer with a deferred payment. At the same time, the factoring organization buys the right to claim the debt at a discount from the supplier. The risk that the buyer will not pay on time or will not be able to repay the debt at all falls entirely on the factoring company.

Factoring without recourse is more expensive for the seller than factoring, because the cost of the service must include the risk of non-payment. In addition, by actually providing the debtor, factoring company is forced to monitor the creditworthiness of various organizations - the supplier's customers, which in itself is not cheap.

In our country, the following practice has developed. As a rule, the seller receives 90% of the payment due to him. The remaining 10% minus commission - only when the debtor repays the debt. If he does not pay, then the balance is not paid. Thus, the supplier risks only these 10%, and not the entire amount. The factoring company, in turn, receives an insurance premium for its risk.

Factoring services without recourse in our country are used less frequently: according to various estimates, from 8% to 14% of the total number of such operations.

See what "Factoring without recourse" is in other dictionaries:

NON-REGRESSIVE FACTORING- Without the right of recourse, when the factor finances the supplier without the right to subsequently return monetary claims to the supplier in case of non-payment by the payer. At the same time, the risks of factoring operations are borne by the factor itself (Procedure for conducting by banks ... ... Law of Belarus: Concepts, terms, definitions

Factoring- (eng. factoring from eng. factor intermediary, sales agent) is a set of services for manufacturers and suppliers conducting trading activities on a deferred payment basis. Three persons are usually involved in a factoring operation: a factor ... ... Wikipedia

- - financial service of a specialized company or bank. IN general view factoring is used as follows: the supplier sells the goods to the buyer without requiring immediate payment for it. For the buyer of this product, the seller is paid by a specialized ... ... Banking Encyclopedia

- - a type of factoring, in which in case of non-payment of the debt by the buyer of products or services, the amount of the debt is written off from the supplier's creditor. Since the risk when using factoring with recourse is much less than when factoring without ... ... Banking Encyclopedia

FACTORING- (eng. factoring from factor - agent, factor, intermediary) - a type of trade commission transactions associated with the assignment by the client to the supplier of a specialized institution (factoring company or factoring department of the bank) ... ... Financial and Credit Encyclopedic Dictionary

FINANCING AGREEMENT UNDER ASSIGNMENT OF CREDIT (FACTORING)- in accordance with Art. 153 BC under a financing agreement against the assignment of a monetary claim (hereinafter referred to as the factoring agreement) one party (factor) a bank or a non-bank credit financial institution undertakes to the other party (creditor) to enter into ... ... Legal Dictionary of Modern civil law - (International settlements) International settlements trading operations Basic shapes and legal features international settlements, systems for their implementation Contents Contents Section 1. Basic concepts. 1 Definitions of the described subject ... ... Encyclopedia of the investor

For a person who first heard the word "factoring", it will seem something very complicated and intimidating. However, its essence is quite simple, and modern business it helps to solve a lot of problems.

Non-standard bank financing

Although factoring is not a classic type of lending, it is one of the forms of financing.

Understanding what factoring is, its types and implementation schemes is quite easy, you just need to understand its essence.

There are several definitions that fully reveal the meaning of factoring operations:

In terms of meaning, they distinguish both factoring with recourse (the definition of the variety and its essence are set out further in the text), and financing that does not provide for the right to repurchase the debt on the part of the buyer.

Both banking institutions and specialized factoring companies offer this type of lending.

Potential clients

Factoring financing may potentially be of interest to companies that sell goods or perform services on a deferred payment basis with their counterparties. This will allow them to avoid cash gaps in their activities and increase production volumes.

Of course, factoring will be an ideal solution for those organizations that set themselves the goal of expanding the sales market, and dependence on prepayment as a form of payment does not allow this.

Factoring lending scheme

The stages of financing are as follows:

Choosing a factoring agent

What should you pay attention to when choosing a company that will provide factoring services?

First and foremost is the cost. Factoring, like any type of lending, is a paid service. Its price is higher than classical bank financing due to the lack of collateral in the form of "hard" collateral and, accordingly, the higher risks of the bank. However, if you find a bank that offers factoring as part of cooperation with its customers, then it will be cheaper than with third-party organizations.

The amount of the advance payment, which means the amount of money that will be transferred to the seller upon the submission of shipping documents to the bank, its amount for each financial institution its. Its run-up can be from 50% to 90%.

In the factoring agreement, it is worth paying attention to the presence of the right of repurchase, which provides for the possibility for the buyer to repay the advance payment previously issued by the bank. This makes it possible to save on future interest payments. And it’s good if such a right is provided for in the contract as a voluntary desire. It happens that this clause in the contract is stipulated in the "Obligations" section.

Varieties of factoring and their difference

The most exciting question for those who have decided to use this form of financing is: "What happens if the buyer does not pay me on time or refuses to pay at all?" As already noted, there is such a type of factoring as recourse factoring. It implies that the bank has the right to require the seller to pay for previously paid financing if it has not been received from the buyer within the agreed period.

The difference between factoring without recourse and financing with the right of recourse is that the specialized institution is unable to recover the amount of the debt from the supplier if the customer has violated the terms of payment under the contract. In this case, the bank will cover this debt in its accounting at the expense of its income or reserves.

If we talk simply about factoring with and without recourse, then the presence of this opportunity means that the financial institution has the right reverse claim regarding the reimbursement of the amount previously paid to the seller. It should be noted that in the first case the cost of this banking service will be lower than in the second.

Pros and cons of factoring with and without recourse for the parties under the contract

For the bank, it also matters what service to sell to the client. The difference between factoring with and without recourse for a financial institution lies in who bears the risk of non-repayment of the debt by the debtor. And in the absence of the right to recover money from the buyer, the factor very carefully approaches the choice of the client.

For the supplier, the non-recourse option is very advantageous. However, for him, the difference between factoring with and without recourse can be felt in the higher price of the financial transaction and the minimum amount of the first tranche. The bank reinsures itself and pledges partial coverage of possible losses due to an increased interest rate in case of non-payment of debt by the customer. Features of factoring with recourse and without recourse is that in the first case a more significant amount of the advance payment is assumed, which for the seller can be up to 90% of the total debt. And this type of financing is more popular in the financial market.

Another difference between factoring with recourse and without recourse is that in the first option, along with the funds transferred in advance, the seller additionally receives a service from a financial institution in the form of information support and accounting for receivables. In the case where the bank does not have the right to buy back, the debt is completely transferred to the factor, and there is no opportunity to be aware.

Benefits of factoring for business

This type of financing has many advantages compared to classic lending:

• No additional costs for registration of collateral.
• The minimum package of documents for considering the issue of setting a limit.
• The possibility of expanding sales markets for the seller and the list of suppliers for buyers.
• additional verification the reputation of the debtor on the part of the bank.
• Opportunity to enter European markets.

In the previous issue, we talked about factoring and the benefits that a company receives from using it. This article is for those who have already concluded an agreement with a bank and wish to learn the nuances of accounting for factoring operations.

Types of factoring

Factoring (or as it is designated in Art. 824 Civil Code RF - financing against the assignment of a monetary claim) is a service for managing receivables and financing working capital. Its essence is as follows: a company, let's say a supplier, transfers to a financial agent (a bank or a factoring company) the right to demand repayment of debts from debtors, and in return receives money. True, minus the remuneration of the financial agent. There are two types of factoring agreement: with the right of recourse and without.

Recourse factoring means the agent's right to require the supplier to repay debts instead of the buyer if the latter fails to pay on time. And now, during the crisis, this view financial service the most relevant. Another type of factoring - without recourse - implies that all the risks of non-payment of debts by the buyer are borne by the financial agent.

Recourse factoring

In this case, the supplier is liable to the financial agent for the fact that the debtor does not repay (or does not repay on time) the debt that is the subject of the assignment. The company ships the goods to the buyer. And then transmits Required documents(invoices, consignment notes) to a bank in order to receive financing against the assignment of a demand for payment for goods sold. Naturally, the amount of assignment under the factoring agreement is less than the amount of shipment under the supply agreement.

Accounting

It is more convenient to record operations under a factoring agreement on a separate sub-account “Settlements under a factoring agreement” of account 76 “Settlements with different debtors and creditors”.

By entering into a factoring agreement, the company, in fact, sells its receivables to a financial agent. That is, the asset is being disposed of. Therefore, on the date of transfer of the right of claim in accounting, it is necessary to first reflect the proceeds from the sale of the debt (clause 7 of PBU 9/99), and then the costs associated with the sale (clause 11 of PBU 10/99). And since in case of non-fulfillment of the obligation by the debtor, the financial agent can foreclose on the company's funds, the assigned debt of the buyer should be listed off the balance on account 009 “Securities for obligations and payments issued”.

Plus you have to pay an agency fee. This payment is taken into account as part of other expenses in the debit of account 91, sub-account “Other expenses” (clause 11 of PBU 10/99).

Financing operations against the assignment of a monetary claim are subject to VAT. This means that the financial agent will have to pay tax. The fact is that the list of banking operations exempt from paying VAT is given in subparagraph 3 of paragraph 3 of Article 149 of the Tax Code of the Russian Federation. And there is no financing operation against the assignment of a monetary claim (letter of the Ministry of Taxes of Russia dated June 15, 2004 No. 03-2-06/1/1371/22). The judges agree with this (see, for example, the decision of the Federal Antimonopoly Service of the North-Western District of October 26, 2005 No. A56-45999 / 04).

It is possible to deduct the amount of VAT from the remuneration paid to a financial agent in general order. True, sometimes inspectors believe that withholding the amount of remuneration is a netting. This means that the amount of VAT must be transferred by a separate payment order, as required by paragraph 4 of Article 168 of the Tax Code of the Russian Federation. But the Ministry of Finance of Russia refutes the opinion of the tax authorities, considering the settlements with the agent in cash (letter dated July 25, 2007 No. 03-07-05 / 44). Thus, to deduct VAT, it is not required to pay tax by a separate payment.

income tax

There are no special rules for tax accounting under a factoring agreement. This is its essential difference from the contract of assignment of the right to claim, the taxation procedure of which is regulated by Article 279 of the Tax Code of the Russian Federation (see letter of the Ministry of Finance of Russia dated April 17, 2008 No. 03-03-06/1/284).

Is it possible to attribute the costs of bank services to expenses? It is possible, but there are nuances, which the Ministry of Finance of Russia spoke about in its letter dated November 6, 2007 No. 03-03-06 / 1/772. The bottom line is this: if the amounts of remuneration in the factoring agreement are indicated in absolute terms - in rubles (for example, for the processing of registers), then they must be taken into account as other costs associated with production and (or) sale (subparagraph 25 of paragraph 1 of Art. 264 of the Tax Code of the Russian Federation). Also, the company can write off the costs for the services of a factoring company on the basis of subparagraph 49 of paragraph 1 of Article 264 of the Tax Code of the Russian Federation (subject to the provisions of paragraph 1 of Article 252 of the Code).

It is a completely different matter if the commission to the financial agent is paid in percentage terms, for example, for the administration of debt or for providing Money. It should be taken into account as part of non-operating expenses in accordance with subparagraph 2 of paragraph 1 of Article 265 of the Tax Code of the Russian Federation. At the same time, according to the Ministry of Finance of Russia, it is necessary to comply with the restrictions established by Article 269 of the Tax Code of the Russian Federation, since this commission can be considered as interest on debt obligations.

True, about the restrictions - this is a moot point. The fact is that interest on debt obligations and the cost of paying for the services of a financial agent, such as a bank, are two independent types of expenses. Of these, only payment for the use of borrowed funds falls under Article 269 of the Tax Code of the Russian Federation. And the list of banking services that can be attributed to expenses is not specified in the Tax Code. Therefore, any remuneration to both the bank and the factoring company can be accepted as expenses. The main thing is that they are economically justified and documented. Let's say right away that the inspectors will probably not like it, and the company will have to defend its position in court. An example of good practice is the resolution of the Federal Antimonopoly Service of the Urals District dated November 2, 2005 No. Ф09-4898 / 05-С7.

And officials also advise: if each type of payment is named separately in the contract, then expenses must also be taken into account separately (letter of the Ministry of Finance of Russia dated August 4, 2008 No. 03-03-06 / 1/437).

EXAMPLE

Goods Wholesale LLC entered into a factoring agreement with the bank with the right of recourse. The company shipped goods in the amount of 590,000 rubles. (including VAT - 90,000 rubles). The bank's remuneration amounted to 59,000 rubles. (including - VAT 9000 rubles) and was withheld at the time of provision of funds. The accountant makes the following entries:

DEBIT 62 CREDIT 90 sub-account "Revenue"

RUB 590,000 - the goods are shipped to the buyer;

DEBIT 90 sub-account "Value Added Tax"

CREDIT 68 sub-account "Calculations for VAT"

90 000 rub. - VAT is charged on the cost of goods;

DEBIT 51

RUB 531,000 - reflected the receipt of financing from the bank;

DEBIT 009

RUB 590,000 - reflected the amount of issued security;

DEBIT 76 sub-account "Settlements under the factoring agreement"

CREDIT 91 sub-account "Other income"

RUB 590,000 - reflected other income from the assignment of the right to claim;

DEBIT 91 sub-account "Other expenses"

CREDIT 76 sub-account "Settlements under the factoring agreement"

50 000 rub. - the bank's remuneration was taken into account;

DEBIT 19 CREDIT 76 sub-account "Settlements under the factoring agreement"

9000 rub. - accepted for VAT accounting on the amount of the bank's remuneration;

DEBIT 68 sub-account "Calculations for VAT" CREDIT 19

9000 rub. - accepted for deduction of VAT from the amount of the bank's remuneration;

DEBIT 91 sub-account "Other expenses" CREDIT 62

RUB 590,000 - reflected other expenses upon disposal of the right of claim;

CREDIT 009

RUB 590,000 - the amount of issued collateral is written off.

Suppose that the debtor company did not pay the money on time, and the bank foreclosed on the company. It reflects like this:

DEBIT 76 sub-account "Settlements under the factoring agreement" CREDIT 51

RUB 590,000 - the previously received amount and remuneration were returned to the bank;

DEBIT 76 sub-account "Calculations on claims"

CREDIT 76 sub-account "Settlements under the factoring agreement"

RUB 590,000 - reflected the claim to the buyer for unpaid goods.

Non-recourse factoring

Accounting for non-recourse factoring transactions is very similar to recourse factoring transactions. But since the risk of default by the debtor is borne by the financial agent, it is not required to use the off-balance account 009 “Securities for obligations and payments issued”.

And the taxation of non-recourse factoring transactions is similar to the one we described above.

You can leave an application for factoring financing on the website: http://absfactoring.ru.

Factoring agreement without recourse - an agreement between the supplier (seller) and the factoring company (bank), under which the supplier undertakes to cede to the factoring company monetary claims against its buyers, and the factoring company undertakes to redeem these monetary claims by paying financing in the amount of % (usually 90 ) from the nominal value of delivery.

A distinctive feature of factoring without recourse from recourse factoring is that the supplier does not have the risk of non-payment for the delivery by the buyer. Those. the factoring company independently recovers the debt from the buyer in the event that he did not pay for the products received from the supplier within the agreed time frame.

In a non-recourse factoring agreement, there is no right for the factoring company to demand from the supplier a recourse on previously paid supply financing.

Non-recourse factoring is a comprehensive tool that allows the supplier to solve not only the issue of financing the payment deferral, but also to increase the payment discipline of buyers and significantly reduce the risk of non-payments from buyers, wherever they are. At the same time, as in other types of factoring, it is required to notify the buyer about the use of the factoring settlement scheme by the supplier.

Also, an important aspect is that the assignment of receivables under a non-recourse factoring agreement gives a balance effect, i.e. the supplier writes off accounts receivable from its balance sheet to the balance sheet of the factoring company, which increases its investment attractiveness. Lenders, including banks, analyzing balance sheets with a large amount of receivables, rightly believe that a company may have a significant amount of overdue commercial loans, the return of which may not occur. Accordingly, the risk for such a client is not clear. As a result, banks often refuse loans to companies with large receivables.

Parties under a non-recourse factoring agreement

Client - a company that supplies goods / products, or provides services, or performs work on a deferred payment basis.

Factor - a bank or specialized factoring company that finances deferred deliveries, which the client cedes to the Factor.

Buyer - a company that purchases products from a supplier, or orders services, works under a contract with a deferred payment. The buyer is not a party to the contract, but participates in the relationship of the parties.

Flow of funds

1. The supplier ships the product to the buyer.

2. The factoring company finances the supplier (~90% of the amount of the supply) and receives in return the right to claim against the buyer.

3. After the grace period, the buyer pays 100% of the products purchased from the supplier to the account of the factoring company.

4. The factoring company makes mutual settlements with the supplier, returning the remaining 10% minus its own commission.

Important! The buyer's payment to the supplier's account, and not to the factoring company, is considered incorrect and the buyer is obliged to re-pay the products to the factoring company's account. In this case, the buyer must be notified in writing about the use by the supplier of the factoring scheme of mutual settlements.

Factoring cost without recourse

Cost is highly dependent on size and financial condition buyers and the size of the factoring company itself.

The solvency of the buyer is the key and only element of the return of the paid financing, in contrast to recourse factoring. Therefore, if solvency is in doubt, the factoring company will either refuse to work on this product, or the cost will be very high.

The spread of rates is approximately the following: 15-18% per annum for big business, 18-23% - for medium-sized, 24-40% - for small businesses.

For business

All articles

Non-recourse factoring

Requirements

• A legal entity has the form of LLC or IP.
• The business was registered at least six months ago and is actually conducted for at least this period.
• There is no negative credit history in any bank.
• Guarantee may be required depending on financial condition individuals- business owners.
• There are no restrictions on the number of debtors.

Learn more about non-recourse factoring

Non-recourse factoring is a type of factoring in which specialized company or the bank finances a purchase and sale transaction with a deferred payment, while the risk of non-payment by the buyer of the debt is borne by the factor. Non-recourse factoring has a higher cost than regressive factoring. Before financing a transaction, the factoring company conducts a comprehensive analysis of the debtor's solvency.

Scheme of interaction of participants

A non-recourse factoring transaction consists of the following steps:

1. The supplier ships the goods or provides the service to the buyer with a deferred payment.
2. A contract for the assignment of the right to a monetary claim is drawn up. The notification must be signed by the buyer, confirming the agreement to transfer payment to checking account factor a.
3. The factor transfers to the supplier up to 100% of the transaction amount, minus the discount.
4. The buyer pays the factor 100% of the debt.

Benefits of non-recourse factoring

Non-recourse factoring makes it possible to carry out deliveries with deferred payment reliably and safely. Although this type of service is not the most common in the domestic market due to relatively high tariffs, non-recourse factoring is still attractive for businesses for a number of reasons:

• The factor relieves the client of credit and liquid risks. In the event that the buyer does not fulfill the obligations in part or in full, delays payment, the factor assumes the associated risks for the return of funds, including litigation. The client is protected from financial losses.
• The working capital of the organization is replenished, their deficit is reduced, cash gaps are reduced to a minimum, sales volumes are growing and their geography is expanding.
• The supplier receives up-to-date information about the real solvency of the buyer, based on a thorough analysis of his creditworthiness.
• Non-recourse factoring provides an opportunity for an organization to reduce the administrative costs associated with managing receivables.