What is the purchase of receivables

About purchase of receivables

Repurchase of receivables is an alternative form of financing receivables from the supply of goods or services provided. Receivables with short, medium or long-term maturities can be purchased, with a usual minimum maturity of 180 days. The maturity of receivables can be agreed on in the form of a fixed repayment calendar. The client is entitled to assign select receivables of the factoring company. It will usually provide funds against them in the amount of 100% of their nominal value in accordance with the terms of the framework agreement on the assignment of receivables for consideration.

Receivables are transferred to a factoring company, which, in addition to financing them, provides a range of services for factoring users in the area of debt management and collection, or only after assuming the risk of non-payment due to insolvency or reluctance of the respective customer. It is a product suitable for one-time and repeated transactions. Receivables can be purchased with or without recourse to the original owner of the receivable.

Criteria for purchase of receivables

  • accounts receivable must be assignable and collectible
  • one-time or repeated deliveries
  • minimum amount of assigned receivables usually CZK 5 million
  • company with at least one-year history
  • payment conditions – to an open account

How to do it

  • based on negotiations with Factoring KB, filling in the application form for factoring including the specification of customers proposed for factoring cooperation  and  presentation of necessary documentation
  • credit analysis and assessment of business case by Factoring KB
  • conclusion of a framework agreement on assignment of receivables for consideration and start of a cooperation.