Erste Factoring

Balance (Balance sheet) factoring is a tailor-made product for clients wishing to improve their balance sheet and other financial data as of the end of accounting period.

Balance factoring makes the best of one of the most important factoring advantages - e.g. does not increase company indebtedness and is therefore used by companies, which cannot or do not wish to take out new loans or by companies needing to improve their balance sheet accounts as of the given date.  Using factoring based funding has no impact on company liability accounts, but receivables are sold and therefore the transactions only have impact on the assets part of the balance sheet.

As the majority of receivables are assigned at the end of accounting period, the client can use collected funds as working capital - e.g. to settle its liabilities to customer or for short-term loan settlement. This operation results in company balance improvement as well as optimization of indebtedness, share of bank loans in total assets or ROA (return on assets).

MODEL EXAMPLE

 

  No Factoring Factoring Balance Factoring
ASSETS 100 100 60
Fixed assets 30 30 30
Non-fixed assets 70 70 30
Petty cash and equivalents 5 45 5
Current receivables 50 10 10
Inventory 15 15 15
LIABILITIES AND EQUITY 100 100 60
Equity 30 30 30
Profit 5 5 5
Liabilities 70 70 30
Bank loans 50 50 10
Current liabilities 20 20 20
 
Financial data:      
Total indebtedness 70% 70% 50%
Loans / Assets 50% 50% 17%
ROA (return on assets) 5,0% 5,0% 8,3%

No factoring - the company does not take advantage of factoring, has 50 million CZK in short term receivables and may not have enough operating cash to pay its liabilities to suppliers, state authorities, etc.
Factoring - the company takes advantage of factoring, assigns 40 million CZK to the factoring company, which immediately provides funds. The company may use the funds to pay its liabilities to suppliers, etc.
Balance factoring - the company takes advantage of factoring and uses the funds provided by a factoring company for single time receivable assignment to pay its liabilities (such as bank loans). This results in overall improvement of company balance (see financial data above).

 

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