Your guide to factoring

Welcome to Factoring Companies Biz Malta!

Factoring is a form of financing where a business sells its accounts receivable to a financier known as a factor. Once a business sells its accounts receivable (or invoices) the business immediately receives cash for a percentage (70-90%) of the invoice. The remainder is paid to the seller when the full invoice payment is received and cleared by the factor.

There are usually two costs involved in Malta. Those are a service charge expressed as a percentage of sales factored and an interest charge for the cash advances. The service charge, covering sales ledger management, collections services and bad debt protection can range between 0.5% and 3.0% of turnover. The main considerations in determining the service charge are your annual turnover, number of invoices and number of customers. The interest charges calculated on the daily usage of funds is typically comparable to normal bank overdraft rates.

The factor takes full responsibility for collecting the debt. The factor is required to pay additional fees, usually a small percentage, once collection efforts prove successful.

Businesses benefit from the acceleration of cash flow. Factoring is more attainable than traditional bank and equity financing. When you choose the right Maltese factoring company to co-operate with compare the different companies carefully before making any decision.