A type of banking service for financing economic entities. Under this service, the bank recognizes the rights of economic entities to claim payment for goods received from payers, work performed and services rendered, with the right of recourse.
| Terms | Description |
| Key definitions | Factoring is a type of banking service for financing business entities (suppliers), under which they assign to the bank (financial agent) the right to receive payments accepted by payers for goods supplied, work performed or services rendered under contracts providing for deferred payment. Traditional factoring — the Supplier (creditor) initiates the use of the factoring service, and the factoring agreement is concluded among three parties. Reverse factoring — the payer (debtor) initiates the use of the factoring service, and the factoring agreement is concluded with the payer (debtor). The Supplier’s (creditor’s) written consent to payment through the factoring service is obtained. Factoring agent — a commercial bank (financial agent), a legal entity that finances the supplier by purchasing its claim rights in exchange for assignment of the receivable. Payer (debtor) — a party using the supplied goods/services and repaying the debt owed to the factoring agent (bank) arising under the factoring agreement. Supplier (creditor) — a business entity supplying goods/services and financed under a factoring agreement in exchange for assigning a receivable (a monetary claim that has not yet fallen due). Accounts receivable — an amount owed for supplied goods/services, acknowledged by the payer, not yet overdue under the contract, and payable. Discount — the difference between the amount financed by the bank and the amount of the payment claim under the contract. With recourse — with the right of recovery, meaning that if the payer (debtor) fails to make payment within the period specified in the factoring agreement, the bank acquires the right to claim that payment amount from the Supplier (creditor). General Agreement — factoring services provided under individual factoring agreements for up to 90 days (up to 180 days in foreign currency) under a General Agreement concluded for up to 12 months. |
| Borrowers | Legal entities |
| Positive Credit History Requirements | • no current overdue debt; • no outstanding loan balances under court proceedings and no principal or interest transferred to off-balance-sheet accounts; • KATM score above 200; • no outstanding loans classified as “unsatisfactory”, “doubtful”, or “loss/bad debt”; • no overdue loan debt of related companies within the Garant bank JSC system. For loans during the last 12 months: • no more than 3 overdue debts exceeding 60 days; • no more than 2 overdue debts exceeding 90 days, and no overdue debt exceeding 90 days during the last 6 months. |
| Customer Account | Primary or secondary |
| Form of Factoring Service | Under a General Agreement or on a one-time basis |
| Maximum Factoring Amount | Unlimited |
| Factoring term | In national currency - up to 90 days; In foreign currency - up to 180 days. |
| Purpose of Factoring | Purchase of accounts receivable arising from supplied goods/services |
| Factoring Currency | National or foreign currency |
| Factoring Disbursement Scheme | Under this product, a factoring account is opened for the Supplier (creditor) in traditional factoring and for the payer (debtor) in reverse factoring. The factoring amount, less the discount, is transferred from this account to the Supplier. |
| Discount Rate (monthly) | In national currency: 2% In foreign currency: 1.2% * The rate may subsequently be changed based on a decision of the Financial Committee. |
| Cases Where Factoring Services Are Not Permitted | - factoring services are not provided to customers with a negative credit history (scoring score below 200); - factoring services are not provided to customers with overdue loan debt or debt under Card File No. 2; - claims against budget-funded organizations; - debt obligations of individuals; - obligations of enterprises declared insolvent; - enterprises that consistently operate at a loss; - financing of capital investments; - export consignment contracts; - compensation and barter transactions; - contracts providing for phased payment for work or advance payments; - purchase and sale agreements under which the payer has the right to return the goods within the period specified in the contract, including after the sales service has been provided. |
| Collateral for the Product | Not required |
| Liability for Overdue Payments | If factoring payments are not made by the due date, the Supplier (creditor)/payer (debtor) shall pay the bank a penalty of 0.2% of the overdue payment amount for each day of delay (however, the total penalty may not exceed 50% of the overdue payment amount). |
