Factoring (faktorings)

Factoring is a deal in which a business (the client) transfers its money claims against buyers, such as unpaid invoices, to a factor for agreed consideration and receives cash without waiting for the due date. In Latvia the factoring contract is governed by Sections 468 to 473 of the Commercial Law.

Both existing claims and claims that will arise in future can be transferred. If the buyer is a merchant, an agreement between buyer and client forbidding transfer of the claim does not apply to a transfer to a factor. Once the buyer has been notified of the transfer, it must pay the factor, and paying the factor discharges it towards the client.

Unless the contract says otherwise, the client answers to the factor for the claim actually existing but not for the buyer being able to pay it. Many contracts split that risk differently, and that clause is what largely sets the price of factoring.