Factoring as one of the pillars of business development

Factoring as one of the pillars of business development
Factoring as one of the pillars of business development

An important quality of “Ambergs” is the ability to quickly respond to changes in demand and trends. If the supply of large volumes of cheaper products, for example from China, requires several months of work in advance, “Ambergs” is able to ensure the delivery of new goods from Europe within a few weeks. The company’s wholesale partners are the large construction material trading companies (“Ksenukai”, “Kurši”, etc.) that work in Latvia and elsewhere in the Baltic States, therefore “Ambergs” plans to expand its operations outside of Latvia as well.

Describing the contribution of factoring in the company’s daily work, A. Tēraudkalns emphasizes that this tool stabilizes the company’s cash flow. The deferred payment to the sellers of goods reaches from 90 to even 120 days, but the suppliers must be settled within 45 days. The difference between the two settlement times can be financed with the help of factoring, so this is a particularly suitable financial instrument for trade. Historically, the company has also cooperated with financiers from the non-banking sector, but in recent years it has made sure that the bank’s offer in factoring is much more profitable.

What is factoring and reverse factoring?

Factoring allows businesses to sell their invoices, or receivables, to a bank for immediate cash flow. Also, through factoring, you can attract insurance to check your potential cooperation partners. SEB banka’s classic factoring solution is one of the most competitive solutions on the market.

Conversely, reverse factoring, also known as supply chain financing, is similar to factoring, but allows suppliers to sell their receivables to the buyer’s financial institution. This helps companies improve their supplier relationships and ensure a stable supply chain – allowing them to extend payment terms to their suppliers, as well as obtain a procurement discount due to the different credit risk levels between the larger buyer and the supplier. This solution creates a win-win situation for both the buyer and the supplier. The buyer optimizes working capital, while the supplier generates additional operational cash flow, thereby reducing risks in the supply chain.

The article is in Latvian

Tags: Factoring pillars business development


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