El Blog de Àlex Plana Paluzie [Between laws & precedents] The purpose of this blog is to analize the legal system of Catalonia, Spain and Europe. It focuses mainly on business law and, in particular, corporate and mergers and acquisitions (M&A). It also addresses issues about economics, marketing, politics, current affairs and other legal systems different to the aforementioned.
Concept and differences between factoring and reverse factoring
Para la versión en castellano ir a este Link. Per la versió en català anar a aquest Link.
First of all, we
should note that reverse factoring in spanish is known as confirming.
Factoringis a contract
whereby an entity undertakes
to manage the collection of loans from a client, in which the service can
include, besides management service (administration), the advance of its loans
and ensure recovery of a portion or the total amount of these.
The parties to the factoring contract are two,
the client and the entity known as factor. Therefore, as we had seen in
the post “Sobre la cesión de créditos”,
the debtor is outside the factoring agreement, in which it is not
necessarythe consent of the
debtor, without detriment of the notification to the debtors affected by the
As we already
advanced, there are three kinds of basic benefits
under these contracts: i) just an administrative management, ii)financing, which means paying before the maturity (with interests
in the entity’s profit) and iii)
total or partial guarantee, in which
the entity assumes the risk of default on the loans, even in case of
insolvency. Depending on how the credits are guaranteed we can distinguish
between non-recourse factoring and recourse factoring. With the first one the
bank assumes the risk of insolvency and, therefore, cannot exercise a right of
reimbursement against the client. Instead, if it’s agreed with recourse, the
entity won’t be responsible for unpaid amounts, so it may exercise a right of reimbursement
against the client.
factoring we are facing a similar figure to factoring, but in this case the
client is a debtor of its suppliers (instead of a creditor). Therefore, reverse factoringis a contract by
which the entity provides a management service and also a financing service to
his client and the suppliers of it, while assuming payments. Furthermore, by
reverse factoring the bank will also accept receipts before maturity and thus charge
the interests for the service provided.
As we have seen, in
a reverse factoring there are more parties than in a factoring, as well as the
entity and the client there are the suppliers. It is also important to notice
that the way to get money by the entity differ according to the type of
contract. In the reverse factoring the entity need to be active and sell
advance payments to suppliers to collect interests.
 The entity is a Bank or a Credit institution (in spanish Establecimiento financiero de crédito).