Partial factoring entails financing a factoree?s (supplier?s) accounts receivable without taking on the risk of default of payment.
As part of this service the factoree (supplier) receives an advance payment for his or her invoices (a typical advanced payment covers approx. 80-90%) immediately after supplying the factoring agency (financing institution) with a copy of the accounts receivable along with documents that confirm delivery of goods. The remaining amount on the invoice (10-20%) is transferred to the factoree?s account as soon as the recipient pays for the provided goods.
This service has significant impact on a company as it ensures constant flow of funds for the supplier ? as soon as goods are supplied to the recipient. Thanks to this the factoree (supplier) does not have to wait until the account receivable is executable ? which in many cases means taking on the burden of financing past-due invoices.
If the recipient is late with payment, the factoring agency undertakes disciplinary steps previously established with the factoree ? e.g. makes debt-collection phone calls, sends payment reminders, etc.
The factor agrees to accept delay in payment during the recourse period (a standard of 30 days). After this period ? if the recipient still has not paid for the invoice ? the factoree is obligated to return the advance payment to the factor. Recourse factoring (partial) can be used both in the case of domestic transactions and when exporting goods.