Factoring is an operation originally based on the practice of “factoring”
Factoring is a means of financing companies through a financing company, the factoring company, to which the receivables of the company will be entrusted. The invoices will mention the need to make payment to the factoring company, which will manage the customer account. Factoring works on the legal basis of payment by subrogation. The factor assumes the client’s solvency risk, but not that of non-payment.
Factoring is thus a combination of a service provision, the management of debt collection, an operation similar to insurance, the credit guarantee of debtors and a credit operation.
Factoring is based on the provisions concerning personal subrogation by payment. However, it should be noted that payment, taking into account the usual stipulations and provisional credit entry, is legally less a payment than a credit advance.
Given its nature, factoring is reserved for credit institutions