Factoring Analysis

The factoring company, specialized in the use of this tool, will analyze the following aspects:

In relation to the Client

Type of business: A rating will be provided for the profitability of the sector, strengths, prospects for the activity in general and the client in particular, threats from outside agents (imports of similar goods, of the use of alternative elements), market share, main competitors, main customers and suppliers, critical components involved in obtaining the end product.

Financial situation: Review of financial background, bank borrowing and supplier credit, compliance, type of financing held, security provided. Average term to collection, average term to payment. It should be stated that the factoring company does not seek to evaluate the past as a key element for its decision-taking, but as part of a dynamic vision to analyze the future of the company, regardless of temporary treasury deviations, prospects for growth based on the quality of its customers, and its profitability margins.

Sales policy: The basic sales elements ensuring the permanence of a company are the quality of its products and competitive prices, which lead to its profit margin. Analysis is made of aspects such as:

	Volume of sales for at least the last two fiscal years.
	Volume of sales in the period after the last year-end closing.
	Gross sales, divided into domestic and export sales.
	Returns and debit notes issued.
	Open purchase orders.
	Balances by customer, with corresponding aging.
	Number of customers.
	Principal customers.
	Average sales.
	Concentration of leading customers.

In addition, the purchasers of goods or services are classified as:

	Public or private sector.
	Wholesalers.
	Exclusive or shared distributors.
	Retail.
	Industrial.
	Service.
	Local sales.
	Exporters.

Production techniques: Level of technology used in the manufacture of products, obsolescence of machinery, location of manufacturing plants, types of products, impact of seasonality on raw materials, dependence on the weather, changes in fashion, contaminating elements, official regulations.

Risk policies: Organization of the credit department and collection areas. Procedure manual for the setting of credit limits for existing and new customers. Rolling over of customer debt, recovery of goods in the event of failure to pay or delays in collection. Bad debts in recent years. Frequency of sales. Opinions of legal counsel regarding unpaid items recorded.

In relation to the Account Debtor

The Account Debtor is the purchaser of the goods or user of the services, and thus the party that must pay for the goods, whether material or intellectual, or services received. In this instance the factor must analyze:

Type of business: A rating will be provided for the profitability of the sector, strengths, prospects for the activity in general and the client in particular, threats from outside agents (imports of similar goods, of the use of alternative elements), market share, main competitors, main customers and suppliers, critical components involved in obtaining the end product.

Financial situation: Review of financial background, bank borrowing and supplier credit, compliance, type of financing held, security provided. Average term to collection, average term to payment. It should be stated that the factoring company does not seek to evaluate the past as a key element for its decision-taking, but as part of a dynamic vision to analyze the future of the company, regardless of temporary treasury deviations, prospects for growth based on the quality of its customers, and its profitability margins.

Once such analysis has been performed, the factor will have a clear view of the current situation and prospects for both participants, and will have sound technical grounds for making the necessary changes to better protect the client against the inherent risks to is business, as a step prior to the entering into of a contractual relationship, reducing the weak points in its commercial chain, to the benefit of all involved. These point should be independent of the existence of financing, as improvement in the aspects reviewed will ensure improved quality of the services to be provided.