Factoring, Forfaiting and Factoring, Forfaiting and Leasing as Nontraditional Leasing as Nontraditional Forms of Foreign Trade Forms of Foreign Trade FinancingFinancing
FEM, MPA Martina HorňáčekováFEM, MPA Martina Horňáčeková
2nd year, Andrea Králiková2nd year, Andrea Králiková
2007/20082007/2008
FactoringFactoring
The way of financing short-term The way of financing short-term claims (14-180 days)claims (14-180 days)
An attractive alternative to raising An attractive alternative to raising equity for small equity for small innovativeinnovative
fast-growing firms 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 factoring2 kinds of factoring
Domestic Exporting
Types of factoringTypes of factoring
Real factoring Unreal factoring Full factoring Confidential factoring Silent factoring Obvious factoring Exporting factoring
AdvantagesAdvantages» 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
FunctionsFunctions
Financing function Function of providing services Insurance function Cash function
Who is the appropriate Who is the appropriate addept for factoring?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
ForfaitingForfaiting 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 forfaitigEvolution 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 forfaitingAdvantages 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
DifferenciesDifferenciesFORFAITING long-term claims a claim must come into
existence at first, then it is purchased
single claims are purchased
a guarantee is required no additional servicies
connected with a claim are provided
FACTORING short-term claims a claim can be purchased
before its existence block of claims is
purchased a guarantee is seldom
required additional servicies
connected with a claim are provided
LeasingLeasing lease = hire, lend
Special form of getting and financing goods
Fixed regular payments
When doing a leasing contractWhen doing a leasing contract
Two parties: the person who leases Two parties: the person who leases (leaser) and leaseholder(leaser) and leaseholder
4 categories of leaser:4 categories of leaser:Leasing companiesLeasing companiesBanks and financial institutionsBanks and financial institutionsBranches of goods producersBranches of goods producersCombined firmsCombined firms
The principalThe 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 historyThe 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 contractsTwo types of leasing contracts
Financial
long-term lease
The property rights gains the leaseholder after finishing the lease
Operative
short-term lease
The leased article remains in property of the person leasing it
AdvantagesAdvantagesFor the leaseholder
No loan conditionsNo investment
restrictions It covers almost 100%
of costsProvides yields in cash
For the leaser
Enables diversification of business risk
Can get back the article when the leaseholder does not fulfil the agreed conditions
Tax regulations
Thank youThank you
for the attentionfor the attention
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