The liquidity of your company, in financial terms, is a very important factor. The Factoring Line or "Factoring" arises as an alternative to solve the need to generate cash liquidity. How does it work? It has two fields of action. The first, and most used in practice, is the model by which companies have their accounts receivable materialized through Quedan or Invoice; these are classified within the assets of their balance sheet but are not reflected as immediate availability. Then, due to liquidity needs, the option of factoring arises, in which the accounts receivable are sold to financial institutions which buy them at a lower percentage (discount), generally 90% or as agreed or determined by the financial institution due to several factors.

As benefits of this operation we can point out that it eliminates the long waiting time that may arise for the payment of our accounts receivable; in this way we would be transforming credit sales into cash sales. Among other advantages we have the reduction of collection risk on the part of your company, since these are transferred to the financial institution that acquires them and this reduces your transaction costs.

Some financial institutions in our country offer this service on a regional basis in Central and South American countries through their network of banks, which can facilitate your company's business with local and foreign clients.

The other field of action of Factoring is to obtain a line of credit for the immediate payment of suppliers; in this case the financial institution enables a line of credit for the exclusive financing of accounts payable, which generates benefits because it gives your company bargaining power with its suppliers as it ensures payment with a shorter deferral period.

For more information about how this may affect your company, please contact our specialized team at bvaldez@bvaldezlaw.com  or  benjamin@bvaldezlaw.com