Factoring

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What is factoring?


Factoring is a service which enables sale of products and services with postponed payment, where for collection you do not have to wait for expiry of the agreed credit period, rather you get the money right away. Factoring combines credit protection, registry of receivables, collection services and financing for companies which sell with an open bank account with payment conditions lower than 120 days. IGA buys invoices and provides factoring users liquidity by providing advance payment for 80-90% of invoice value.

Application (Insurance)

How is factoring secured?


Advance payment is offered with a determined interest rate by which interest is calculated up to the moment of invoice payment from the buyer. Assurance for advance payment represents receivables resulted on the basis of the invoice with payment conditions on an open bank account (bank-assignment). Usually no other collaterals are needed, hence factoring assures additional working capital without binding collateral. With that existing credit lines are freed up in business banks and current assets are used which were previously underestimated and minimally utilized.

What are the support services of factoring?


IGA offers services that ease doing business for the exporter. These imply invoice-registry services, approving credit to buyers and collection of receivables, which are offered on the basis of a sophisticated system for monitoring invoices which enables accurate and prompt reporting to exporters on portfolio fulfillment of their receivables. In respect to IGA rating as a state institution, buyers perceive us to be a serious agency, therefore IGA carries out collection quicker and easier than the exporter.

Quicker turnover of receivables lowers costs of exporters' advance payment and lowers costs of credit exposure towards buyers since IGA offers far more superior credit services and collection of receivables than an individual exporter. Moreover, IGA informs clients on their activities through periodical account statements, information on receivable invoices and summarized sales reports.

What benefit do I have from factoring?


  • Improving cash flow and liquidity by turning receivables into cash,
  • Different options for investing available cash,
  • Financing working capital without demanding mortgage as collateral,
  • Offer for attractive payment conditions on an open account and market expansion on that basis,
  • Elimination of bad and contentious receivables,
  • Decreasing operational costs by removing the credit function from the company into the factoring centre, whereby fixed costs of the credit department are decreased and turned into variable costs based on volume of sales,
  • Higher quality financial information for management.

How much does factoring cost?


The price of factoring is the total interest on the amount of advance payment (e.g. 80% of the invoice amount) and the administrative cost for processing the request for advance payment. For a particular case and more information, contact our staff in one of IGA offices.

Some experiences with factoring


  • One company increased sales by 500% using factoring,
  • Two companies doubled their sales and number of buyers,
  • Ten companies have with the assistance of factoring increased turnover by 50%,
  • One exporter was saved from imminent bankruptcy by taking advantage of factoring (and insured collection on that basis)
  • Through the factoring program, export transactions worth 45 million KM have been supported up until now,
  • Factoring covers sales towards 120 foreign and domestic buyers,
  • IGA has up to present approved factoring arrangements for over 30 clients,
  • Acquired experiences show that the biggest benefit from factoring have had companies with the following characteristics: gross margin higher than 20%, more than three buyers that are located in two or more countries.

What I need to do in order to use the factoring service?


In order to use the factoring service, you need fill out an application form and submit it along with requested documentation to the nearest IGA office. After application approval, you need to conclude a factoring agreement with IGA and fill out a request for credit approval, whereupon a pre-approved credit line is set up for the benefit of your buyer. Afterwards you distribute goods to you buyer up to the approved value (credit limit) and you send the buyer an invoice stating that payment should be carried out in the interest of IGA (assignation of foreign currency income). On the basis of that, IGA approves advance payment and thus enables you to transfer most of the collection risk to IGA, while you immediately receive cash.

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