Factoring is a service in supply chain finance, which provides services including collection, management and guarantee based on accounts receivable.
For example, for example, I am a supplier in JD.COM, and I supply goods to JD.COM, but JD.COM has a 30-day account period, and it will take 30 days to give me the money. Now I only have a bill of accounts receivable. Then I need money badly now, so I'll go to a financial institution for advice. I gave you 654.38+00,000 accounts receivable, and now you give me 900,000. As for the collection of accounts receivable later, your financial institution is responsible for it. For me, when I get the cash, I don't have to consider whether the accounts receivable can be recovered in time, whether it needs to be recovered in the future, and so on. For financial institutions, they have sufficient funds. Now they lend money and can get more money back later. In fact, it is the logic of investing or earning interest on arrears.
The example mentioned above is the most common factoring example.
In this example, the supplier actually found a financial institution with accounts receivable and wanted to ask the financial institution for money. Then financial institutions should judge several things. Is this account receivable true? Can this supplier be trusted? Will JD.COM, the core enterprise, repay the loan in time? In fact, it is more difficult to evaluate the credit of suppliers, because the average supplier is not as big as the core enterprise and the credit is not so good. It will be much easier to evaluate the credit of JD.COM, the core enterprise. Therefore, the factoring business based on core enterprises like JD.COM came into being.
Generally speaking, factoring for the seller is called forward factoring and factoring for the buyer is called reverse factoring. In reverse factoring, the factor finds the core enterprise, communicates with the core enterprise, transfers the accounts receivable to the factor, and the factor pays the goods to the seller. In this way, the seller can discount in time and the buyer can centrally manage his accounts payable.
We can see that reverse factoring has several advantages over forward factoring:
1) is initiated by the core enterprise and based on the credit of the core enterprise.
2) It is very easy to confirm the authenticity of accounts receivable bills;
However, forward factoring is often more common, which is certainly easier to achieve. The core reason is that the demand for core enterprises to take the initiative to do factoring is not strong, because the upstream and downstream funds are under great pressure and the demand is strong.
References:
[1] Analysis on the securitization mode of reverse factoring assets in supply chain finance [Tian Hong Fund Research]/2018/03/06152724198758.shtml.
2019 65438+1October 26th