6. The essence and importance of factoring in financing innovation. Subjective composition of factoring transactions. Factoring efficiency conditions.

7. Scheme of organization of factoring operations.

8. Features and advantages of factoring. The difference between factoring and other legal institutions.

9. Classification of factoring transactions by region, by confidentiality, by the presence of recourse rights, by payment method, depending on the subject composition of the operation.

Topics of abstracts and reports.

1. Organization and technology for monitoring the effectiveness of innovation activities.

2. Determining the impact of factoring on accelerating the turnover of receivables.

3. Calculation of the effectiveness of factoring.

KNOWLEDGE CONTROL

QUESTIONS FOR THE EXAM

1. Innovation: essence, characteristic features.

2. Types of innovations, classification by content, level of novelty, areas of application and other characteristics.

3. Typical mistakes when making management decisions in the field of innovation.

4. Innovative activity: goal, objectives, stages. Basic research. Contents of R&D (scientific research work). Contents of R&D (experimental design developments).

5. Marketing of innovations, its characteristics, specific influence on innovation activities.

6. Characteristic features of innovative activity. The cyclical nature of innovation activity.

7. Innovation activity and product life cycle (micro level).

8. Technological work, production preparation and industrial testing.

9. Acquisition of patents, licenses and know-how.

10. Investment activities necessary for the implementation of innovative projects.

11. Marketing and organization of sales markets for innovative products. Training and retraining of personnel for innovative activities.

12. Relationship between sources of financing of innovation activities and its types.

13. Extra-budgetary funds: own funds of organizations carrying out innovative activities, funds of investors, venture investments.

14. State regulation of innovation activities.

15. The role of the state in the formation and implementation of scientific, technical and innovation policy.

16. Problems and prospects for enhancing innovation activity in various countries: USA, EU states, Russia, Belarus, etc.

17. New approaches to the formation of state innovation policy.

18. Development of innovation policy of the Republic of Belarus: goal, objectives of innovation policy, implementation mechanism.

19. Scientific and technical priorities: concept, justification.

20. Criteria for choosing priority areas in the field of scientific and technological development in the Republic of Belarus.

21. Innovations and their structure-forming role in the economy.

22. Direct and indirect methods of state support for scientific, technical and innovative activities.

23. Principles and methods of forming a national model for regulating innovation activities.

24. State programs: purpose, objectives, development procedure. Innovation funds: education and use.

25. Foreign experience in supporting innovation activities.

26. The state and the market of scientific and technical products.

27. National innovation system.

28. Budget financing is the main form of direct government financing of innovation activities.

29. The main sources of direct government financing of innovation activities in the Republic of Belarus. Objects of direct state financial support in the innovation sphere.

30. R&D of defense production or military nature, space research.

31. Toolkit for state financing of innovation activities.

32. Direct financing (direct budgeting of fundamental research and applied developments aimed at environmental, social, defense purposes).

33. Indirect financing (creating favorable conditions for R&D).

34. Subjects of research activities in need of direct government support.

35. Organizations related to the defense sector of the economy, organizations, the overwhelming majority of whose work cannot be guided by commercial criteria, but whose existence and development are vital for society; profit-oriented business entities engaged in innovative activities.

36. Forms of direct government support for innovative projects. Sources of government funding for innovative projects. Budgetary and extra-budgetary funds for financing research and development work. Practice of creating budgetary funds for financing innovations.

37. The role of extra-budgetary funds in financing the innovation sector.

38. Methods of indirect government financing of innovation: tax benefits, accelerated depreciation, preferential lending.

39. Tax benefits.

40. Non-tax areas of indirect financing of the innovation sector.

41. The essence of shareholder financing of innovation. Advantages

42. equity financing through various types of shares.

43. Organization of the issue of shares. Determining the cost of equity financing for the issuing enterprise.

44. Characteristics of financing innovation through bond issues. Advantages of a bond loan over other methods of financing innovation.

45. Determination of the cost of bond borrowing for the issuing enterprise.

46. ​​The essence of oar financing of innovation. Using promissory notes to finance innovation.

47. The role of bills of exchange in financing innovation activities. Organization of forfeiting bills.

48. Foreign experience in organizing bill programs.

49. The essence and importance of factoring in financing innovation.

50. Subject composition of factoring transactions. Factoring efficiency conditions.

51. Scheme of organization of factoring operations.

52. Features and advantages of factoring. The difference between factoring and other legal institutions.

53. Classification of factoring transactions.

54. Determining the impact of factoring on accelerating the turnover of receivables.

55. Calculation of the effectiveness of factoring.

Questions for self-control on topics and assignments for independent work

Topic 1. The essence and significance of innovation.

Test

Select one or more correct options from the options provided.

1. Main groups of subjects of the innovation process:

a) innovators;

b) early recipients;

c) early majority;

d) early minority;

d) lagging behind.

2. The innovation process proceeds:

a) evenly;

b) gradually;

c) cyclically.

3. Production technology includes:

a) basic technologies;

b) input resources;

c) organization and provision of production and quality conditions;

d) scientific research.

4. Types of innovation that economic theory identifies:

a) introduction of a new product;

b) creation of a new product;

c) introduction of a new production method;

d) creation of a new market;

e) development of a new source of supply of raw materials or semi-finished products;

f) reorganization of the management structure.

5. Depending on technological parameters, innovations are divided:

a) for grocery;

b) production;

c) technological;

d) process.

6. Innovations in the field of organization and management of production, information technology, utilities and social services include:

a) to the technological results of innovative activities;

b) independent results of innovative activities;

c) the combined results of innovation activities.

7. Depending on the depth of changes introduced, innovations are distinguished:

a) cardinal;

b) radical (basic);

c) improving;

d) modification (private).

8. Process innovation is:

a) development of new or significantly improved production methods;

b) changes in equipment or production organization;

c) both.

9. Innovative technologies and production of innovative products exist:

a) separately from each other;

b) interact occasionally;

c) are inextricably linked.

Topic 5. Direct government funding of R&D and innovation activities.

Exercise 1.

The Airwave company, a leading manufacturer of air conditioners in the world, is interested in expanding the sales market in the Republic of Belarus. Alternat LLC has developed and mastered the production of its own air conditioners. Alternat LLC decided to enter into a licensing agreement for the sale of its own air conditioners under the Airwave trademark. It is planned that air conditioners under this brand will be produced along with our own.

To determine the most effective form of payment from the point of view of Alternat LLC under a license agreement for the right to use the Airwave trademark.

Private label air conditioners sell for $50. USA. If you use the Airwave trademark, they will cost $75. USA. Airwave offers an alternative to settlement under the license agreement: a) a lump sum payment in the amount of 1.5 million dollars. USA; b) rental payments from the amount of products sold at the maximum rate (corresponding to the standards).

1st year - 10,000 units;

2nd year - 15,000 units;

3rd year - 15,000 units;

4th year - 18,000 units;

5th year - 18,000 units.

Task 2.

The company offered to purchase, under a license agreement, an industrial property object in the form of a prototype in the field of battery manufacturing. It is planned that they will be produced within five years. Royalties on the cost of products sold are assumed to be maximum in accordance with regulations. At the same time, the company agrees to a lump sum payment of $45,000. USA.

Product price – 150 dollars. USA.

Which option of payment for the right to use an industrial property object will be economically justified if the planned output volume is:

1st year - 10,000 units;

2nd year - 20,000 units;

3rd year - 20,000 units;

4th year - 20,000 units;

5th year - 20,000 units.

Inflation in US dollars is 1% per year.

Topic 6. Indirect government funding of R&D and innovation activities.

Self-control test

Select one or more correct options from the options provided.

1. Science and innovation infrastructure facilities include:

a) concerns and associations;

b) public academies;

c) technology parks.

2. Venture business is characterized by:

a) for large companies;

b) medium-sized firms;

c) small firms.

3. The infrastructure objects of science and innovation are:

a) centers of scientific and technical information;

6) state research centers;

c) public academies.

4. Business incubators contribute to the development of:

a) a specific product;

b) production project;

c) an independent economic entity.

5. The components of the technology park are:

a) business incubators;

b) small scientific and technical enterprises;

c) technopolises.

6. Business incubators can be divided into four main types:

a) corporate;

b) academic;

c) public;

d) university;

d) private.

7. Sources of income for business incubators as a commercial enterprise:

a) rent;

b) sale of various types of services;

c) participation in the profits of those incubated companies in which the park (incubator) as an enterprise has invested its funds;

d) sale of property, including land plots.

8. The business incubator consists of the following highly professional structures:

a) expert advice;

b) BI analytical council;

c) the control unit of a business incubator.

9. Business incubators act as:

a) independent organizations;

b) cores of technology parks;

c) managers of the technopolis.

Lipaeva Elena Evgenevna

Faculty of Economics and Management, branch of the federal state budgetary educational institution of higher professional education "National Research University "MPEI" in Smolensk, Russia

Abstract: the article discusses factoring and other forms of business financing, as well as difficulties with sources of lending for medium and small enterprises. Options were proposed to eliminate these problems, and the prospect of using factoring as a financial and credit service for small businesses was also considered.

Key words: factoring, forfaiting, franchise, lending

Factoring and other forms of business financing

Lipaeva Elena E.

Faculty of Economics and Management, a subsidiary of the federal government"s budget educational institution of higher professional education "National Research University" MEI "in Smolensk, Russia

Abstract: The article discussed factoring and other forms of business financing, as well as difficulties with sources of credit for small and medium enterprises. Options have been proposed to resolve these issues, as well as has been considered the prospect of using factoring as a financial and credit services small businesses.

Keywords: factoring, forfeiting, frenchayz, lending

Factoring - as an economic category, is a type of trade and commission operations in which a bank or a specialized factoring organization buys the monetary claims of a supplier to a buyer and collects its receivables.

Understanding the economic essence of factoring is associated with understanding its place in the system of other forms of business financing.

An operation similar to direct export factoring is forfaiting, which is understood as lending to the exporter by purchasing commercial bills accepted by the importer without recourse to the seller. In fact, forfeiting can be considered as a way to refinance a commercial loan in foreign trade.

The similarities between export factoring and forfaiting and the differences between them are presented in Table 1:

Table 1 - Comparison of export factoring and forfeiting

Similarities	Differences
Credit provided in commodity form is transformed from commercial to banking; A third party appears in the relationship between supplier and buyer; The supplier is relieved of functions not related to production; Supplier risks are reduced; High cost of operations.	grounds	Export factoring	forfaiting
		Short-term lending (90-180 days)	Medium-term lending (from 6 months to 5-8 years) or long-term lending (up to 11 years)
		The factor takes part of the exporter's risks	All risks of the exporter are transferred to the forfaiter
	Nature of the operation	Assumes constant communication between the parties and the presence of a comprehensive service system	Is a one-time operation associated with the collection of funds under a specific document
	Nature of the requirements	The debtor has the right to make demands on the supplier, on the factor	The debtor has no right to make claims against the forfaiter

One more feature of forfeiting should be highlighted - the presence of a secondary market where resale of purchased commercial bills is possible. But such a market does not yet exist in Russia. At present, only isolated such transactions can be considered. This is due to the unwillingness of banks to accept medium-term risks from developing countries, and there is high competition in rates for risks from developed countries. The main players in the forfaiting market in Russia are foreign forfaiters: London Forfaiting Company, which has a representative office in Moscow, the German bank WestLB, which has its own subsidiary, WestLB Vostok.

Factoring is often equated with a bank loan, which is incorrect. It is necessary to compare factoring and lending. The comparison is shown in Table 2.

Table 2 - Comparison of factoring and lending

Criteria	Factoring
subjects	Bank or specialized company, supplier, buyer	Bank, client
Financing terms	Period of actual deferred payment (90-180 calendar days)	fixed term
Repayment terms	Day of actual payment by the debtor for the delivered goods	Prearranged day
Payment terms	Product delivery day	The day specified in the loan agreement
Terms of service	Indefinitely	Repaying a loan does not guarantee that you will receive a new one
Repayment method	From money coming from customer debtors	Returned to the bank by the borrower
Security	Not required. Only the history of the client’s work with his debtors matters	Issued on collateral and provides for turnover on the current account adequate to the loan amount
	Unlimited and can increase as the client's sales volume grows	Issued for a predetermined amount
Reward	Depends on the amount of debt transferred to the financial agent	Loan interest rate
Decor	Factoring financing is paid automatically upon presentation of the delivery note and invoice	A large number of documents are required
Escort	Information, accounting, consulting, legal and other services, accounts receivable management	Mandatory transfer of the borrower to cash settlement services at the bank

The table data shows that the financial products under consideration are aimed at satisfying different needs of suppliers in different ways. The only thing that is common is the essence of the operation – financing.

Knowledge of these provisions will allow you to more effectively use the instruments offered by the financial services market and competently manage the finances of a business entity.

At the present stage, lending under a franchise type contract is distinguished - a form of relationship between large and small businesses, when a medium-sized company receives assistance from an industrial or trading transnational company in the form of a cash loan, leasing, and factoring.

Currently, factoring is a means of increasing the liquidity of assets and turnover of funds of enterprises, primarily small and medium-sized ones. These enterprises, while helping to stabilize the consumer and labor markets, accelerate the development and introduction of technical innovations into production, and revive export activities, traditionally experience difficulties with sources of credit. This appears to be due to the following reasons:

Firstly, the inaccessibility to them of ordinary capital markets and the money market, as a result of which their need for short-term and bank credit increases to replenish working capital. The issue of securities in small amounts is quite an expensive undertaking for such enterprises, and the market for such securities is much narrower compared to financial instruments of larger securities;

Secondly, discrimination in providing them with a bank loan - they are required to provide greater guarantees. Due to the fact that this category of borrowers has questionable creditworthiness, it is not profitable for credit institutions to fully satisfy the needs of small businesses for loans, especially for small amounts and for risky activities;

Thirdly, the high cost of borrowing for small businesses.

Fourthly, financial difficulties when exporting products, including: lending and deferred payment; registration of special documents for export of products; lack of necessary information about foreign markets; the need to comply with product requirements other than internal ones; lack of representation abroad; increased costs and decreased profitability.

The following factors will influence the intensification of banks’ activities in the field of small business lending:

High level of competition in the segments of servicing large corporate clients and consumer lending, leading to a decrease in margins with growing risks. The increasing attractiveness of this direction is due to the fact that the cost of borrowing for medium and large enterprises is much lower than for small ones, and the risks in these sectors differ to a much lesser extent;

The desire of banks to diversify their loan portfolio. This is facilitated by a large number of small borrowers;

Interest from the state in the issue of small business development. But at the same time, many financial institutions that actively work with small businesses registered as legal entities refuse to lend to individual entrepreneurs.

In this regard, the use of various non-traditional types of financial and credit services for small businesses, including leasing and factoring, is promising.

The effectiveness of factoring as a means of financing a small business is determined by the fact that the company not only acquires a good reputation, but can also count on a discount for immediate payment, usually in the amount of 2–3% of the payment amount. Factoring, with its wide and flexible range of services, is one of the most attractive forms of lending for both domestic and export activities of small and medium-sized enterprises, facilitating their entry into a competitive situation with minimal initial capital.

However, factoring is attractive to most corporations, regardless of the size of their business. It allows small companies to receive financing without collateral. Medium-sized enterprises are attracted to factoring by risk insurance and administrative management of receivables. For large enterprises, factoring allows them to “clear” their balance sheet – reduce accounts receivable without increasing accounts payable. This is especially important if the company plans to attract investors. In addition, for large enterprises the issue of getting rid of accounts receivable is always relevant.

Bibliography:

1. Raizberg B. A., Lozovsky L. Sh., Starodubtseva E. B. Modern economic dictionary. M., 2008, p. 436
2. Kuryshev D.V., Steshina M.O. Forfaiting – new frontiers in a crisis. Experience of a Japanese bank in Russia // International banking operations 2009. No. 3; Bryukov V. G. Forfaiting and its application in foreign trade: mechanism and technology // International banking operations. 2011. No. 4; Rannikh N. A. Forfaiting: prospects and problems // International banking operations. 2005. No. 4; Gumanov K. Transaction outside the law // Finance. No. 35, September 26 – October 2, 2006.
3. Vaulina Yu. Brought debts - took away money // Expert - Volga. September 24, 2007. No. 35; Without collateral and loans // “SmartMoney”/ September 1, 2008. No. 32; Logvinov M. Credit of trust // Company. December 5, 2011. No. 45; Velikanova O. Appetite returns // Expert North-West.: June 2011. No. 2; Logvinov M. Regression factor // Company. October 31, 2011. No. 40.

Factoring, like many other financial instruments, came to Russia from the West. This English word factoring comes from factor - commission agent, agent, intermediary, and means the purchase of receivables from the Supplier of goods (services) with the assumption of responsibilities for their collection and the risk of non-payment. The supplier sells accounts receivable, that is, the amounts that buyers owe to the company, a specialized financial institution-factoring company, which in turn is called a Factor. The difference between the Factor and other agents, for example from the assignee, is that he takes possession of the debt, that is, the Supplier loses ownership rights to the receivables.

The economic side of factoring is manifested in the fact that it allows you to increase the liquidity of an enterprise’s assets, as well as capital turnover and thereby the profitability of entrepreneurs. According to Western experts, this is most relevant for small and medium-sized enterprises. The use of factoring in many cases allows enterprises to reduce the cost of maintaining special financial services, increasing the efficiency of financial services by transferring these functions to specialized companies, where such activities are usually more efficient due to a high degree of rationalization.

If we evaluate factoring from the point of view of the opportunities it opens, then in the present conditions factoring in a broad sense is considered to be an important tool of modern management, especially in relation to financing and management of an enterprise, as well as risk management.

In countries with a developed market economy and financial infrastructure, factoring companies or commercial banks engaged in this activity offer their clients a fairly diverse range of financial services, conditional on the latter transferring their monetary claims.

Today, factoring is primarily defined as a legal relationship between a financial agent (factor) and an enterprise selling goods or services (the “client”), according to which the factor purchases the client’s receivables (with or without the right of recourse to the client) and in connection with this debt, controls the loans provided, and also carries out accounting of the client’s trading operations. Thus, factoring has the following main functions:

1) maintaining relevant accounting operations;

2) control over the provided commercial loan, including receipt of payments;

3) protection against credit risks (in the case of “without turnover” factoring);

4) financing the client’s current activities.

1.Types of factoring

Factoring is a type of trade and commission operation, which includes collection of accounts receivable, lending of working capital, guarantees of credit and currency risks, as well as information, insurance, accounting, consulting and legal support for the Supplier.

Depending on the availability of the Supplier’s financing function, factoring services are divided into:

· Factoring with payment (with service factoring), which involves collecting debt, assuming the risk of non-payment and transferring funds as they are paid by the Buyer. In Russian practice, this is called administrative management of receivables. In this case, the Factor's commission is about 0.5-1% of the amount of assigned receivables. The amount of the commission varies from the total amount of the Supplier's debt, decreasing with its growth;

· Factoring with payment and financing (with service plus finance factoring) includes payment to the Supplier immediately after delivery of goods up to 90% of their sales price, in the presence of invoices accepted by the Buyer. The balance is paid after the debt is paid off. In this case, the Factor establishes a risk remuneration for advances (0.5-1.2% of the debt amount) depending on the total number of debtors transferred for factoring services. As the number of debtors increases, the Factor's risks are eroded and the commission decreases. The Supplier also pays the Factor a fee for the use of monetary resources, which is several points higher than the loan rate. The amount of this fee depends on the turnover period of the Supplier's receivables. In Russia, Factor usually requires the provision of original documents for the delivery made (invoice and waybill), charging a small commission (about 50-70 rubles per s/f) for the registration of these documents. In Western practice, such a component of the commission also exists, but often the Supplier sends an electronic file to the factoring company containing a sales book for a certain period; the original delivery documents are provided later.

Internal factoring transactions typically involve three parties: the Supplier, the Buyer and the Factor. In this case, the factoring scheme looks quite simple:

Delivery of goods on deferred payment terms.

2. Assignment of the right to claim the delivery debt to the Bank.

3. Early payment (up to 8 0% from the amount of goods delivered) immediately after delivery.

4. Payment for the delivered goods.

5. Payment of the balance of funds (from 10% , after payment by the buyer) minus commission.

2.Analysis of the buyer’s solvency

When purchasing invoices, the factoring company analyzes the Buyer’s solvency and integrity, since the Factor’s risks associated with non-payment of invoices relate specifically to the Buyer, and not to the Supplier. Of course, the Factor also checks the Supplier, since there is a risk of them providing false delivery documents, which may entail financial losses for the Factor. In order to avoid the appearance of “bad debts” from the purchase of some accounts or debts of individual Buyers, the Factor may refuse or offer an agreement to purchase receivables with the right of recourse, that is, a reverse claim against the Supplier. This agreement stipulates the deadline for recourse, what debts it applies to, when and how it is executed. In Russia, recourse usually occurs 30 days after the expiration of the deferred payment, but the Supplier has the opportunity, with the consent of the Factor, to extend the deferred payment if the Buyer has objective difficulties. The presence of recourse does not reduce the Factor’s risks to zero, but only reduces them. When factoring with recourse, the Factor does not take on credit risk, that is, the risk of non-payment by the Buyer at all, but takes on liquid risk - the risk of non-payment on time, which happens much more often. Russian buyers do not have strict payment discipline. Payment by the Buyer 3-5 days after the expiration of the deferment period is common practice.

It is worth noting that the fact that the Factor has the right of recourse against the Supplier somewhat reduces the cost of factoring services for it (by approximately 15-20%), therefore, it makes sense for the Supplier to assign with recourse the receivables of reliable Buyers who have a good and long-standing credit history, reducing thereby your costs for factoring services.

Introduction 3

1.Types of factoring 5

2.Analysis of the buyer’s solvency 6

3.Closed and open factoring 7

4. Advantages of factoring 10

5.About accounts receivable 13

6.Credit or Factoring 19

Conclusion 22

References 24

Introduction

Factoring, like many other financial instruments, came to Russia from the West. This English word factoring comes from factor - commission agent, agent, intermediary, and means the purchase of receivables from the Supplier of goods (services) with the assumption of responsibilities for their collection and the risk of non-payment. The supplier sells accounts receivable, that is, the amounts that buyers owe to the company, a specialized financial institution-factoring company, which in turn is called a Factor. The difference between the Factor and other agents, for example from the assignee, is that he takes possession of the debt, that is, the Supplier loses ownership rights to the receivables.

The economic side of factoring is manifested in the fact that it allows you to increase the liquidity of an enterprise’s assets, as well as capital turnover and thereby the profitability of entrepreneurs. According to Western experts, this is most relevant for small and medium-sized enterprises. The use of factoring in many cases allows enterprises to reduce the cost of maintaining special financial services, increasing the efficiency of financial services by transferring these functions to specialized companies, where such activities are usually more efficient due to a high degree of rationalization.

If we evaluate factoring from the point of view of the opportunities it opens, then in the present conditions factoring in a broad sense is considered to be an important tool of modern management, especially in relation to financing and management of an enterprise, as well as risk management.

In countries with a developed market economy and financial infrastructure, factoring companies or commercial banks engaged in this activity offer their clients a fairly diverse range of financial services, conditional on the latter transferring their monetary claims.

Today, factoring is primarily defined as a legal relationship between a financial agent (factor) and an enterprise selling goods or services (the “client”), according to which the factor purchases the client’s receivables (with or without the right of recourse to the client) and in connection with this debt, controls the loans provided, and also carries out accounting of the client’s trading operations. Thus, factoring has the following main functions:

1) maintaining relevant accounting operations;

2) control over the provided commercial loan, including receipt of payments;

3) protection against credit risks (in the case of “without turnover” factoring);

4) financing the client’s current activities.

1. Types of factoring

Factoring is a type of trade and commission operation, which includes collection of accounts receivable, lending of working capital, guarantees of credit and currency risks, as well as information, insurance, accounting, consulting and legal support for the Supplier.

Depending on the availability of the Supplier’s financing function, factoring services are divided into:

Factoring with payment (with service factoring), which involves collecting debt, assuming the risk of non-payment and transferring funds as they are paid by the Buyer. In Russian practice, this is called administrative management of receivables. In this case, the Factor's commission is about 0.5-1% of the amount of assigned receivables. The amount of the commission varies from the total amount of the Supplier's debt, decreasing with its growth;

Factoring with payment and financing (with service plus finance factoring) includes payment to the Supplier immediately after delivery of goods up to 90% of their sales price, in the presence of invoices accepted by the Buyer. The balance is paid after the debt is paid off. In this case, the Factor establishes a risk remuneration for advances (0.5-1.2% of the debt amount) depending on the total number of debtors transferred for factoring services. As the number of debtors increases, the Factor's risks are eroded and the commission decreases. The Supplier also pays the Factor a fee for the use of monetary resources, which is several points higher than the loan rate. The amount of this fee depends on the turnover period of the Supplier's receivables. In Russia, Factor usually requires the provision of original documents for the delivery made (invoice and waybill), charging a small commission (about 50-70 rubles per s/f) for the registration of these documents. In Western practice, such a component of the commission also exists, but often the Supplier sends an electronic file to the factoring company containing a sales book for a certain period; the original delivery documents are provided later.

Internal factoring transactions typically involve three parties: the Supplier, the Buyer and the Factor. In this case, the factoring scheme looks quite simple:

2.Analysis of the buyer’s solvency

When purchasing invoices, the factoring company analyzes the Buyer’s solvency and integrity, since the Factor’s risks associated with non-payment of invoices relate specifically to the Buyer, and not to the Supplier. Of course, the Factor also checks the Supplier, since there is a risk of them providing false delivery documents, which may entail financial losses for the Factor. In order to avoid the appearance of “bad debts” from the purchase of some accounts or debts of individual Buyers, the Factor may refuse or offer an agreement to purchase receivables with the right of recourse, that is, a reverse claim against the Supplier. This agreement stipulates the deadline for recourse, what debts it applies to, when and how it is executed. In Russia, recourse usually occurs 30 days after the expiration of the deferred payment, but the Supplier has the opportunity, with the consent of the Factor, to extend the deferred payment if the Buyer has objective difficulties. The presence of recourse does not reduce the Factor’s risks to zero, but only reduces them. When factoring with recourse, the Factor does not take on credit risk, that is, the risk of non-payment by the Buyer at all, but takes on liquid risk - the risk of non-payment on time, which happens much more often. Russian buyers do not have strict payment discipline. Payment by the Buyer 3-5 days after the expiration of the deferment period is common practice.

It is worth noting that the fact that the Factor has the right of recourse against the Supplier somewhat reduces the cost of factoring services for it (by approximately 15-20%), therefore, it makes sense for the Supplier to assign with recourse the receivables of reliable Buyers who have a good and long-standing credit history, reducing thereby your costs for factoring services.

3.Closed and open factoring

Factoring can be either open (disclosed factoring) or closed (undisclosed factoring). With open factoring, the debtor is notified that a factor is participating in the transaction and makes payments to his account, thereby fulfilling his obligations to the Supplier. In the case of closed factoring, the seller does not want to disclose the reasons that forced him to use the services of the Factor. The Debtor is not notified of the existence of a factoring service agreement and continues to transfer funds to the Supplier, who in turn endorses them in favor of the Factor. Currently, the possibility of using closed factoring in Russian conditions is limited, as it leads to a sharp increase in the Factor’s risks. Chapter 43 of the Civil Code of the Russian Federation Art. 830 clause 1 states: “The debtor is obliged to make a payment to the financial agent, provided that he has received from the client or from the financial agent a written notification of the assignment of a monetary claim to this financial agent and the notification defines the monetary claim to be executed, and also indicates the financial agent to whom payment must be made." Typically, the procedure for notifying the debtor about the assignment of debt to the Factor is undertaken by the Supplier, because the Buyer will perceive this psychologically and technologically easier than receiving this notification from the Factor. Some Suppliers, before deciding to switch to factoring services, worry that the Factor's work may affect their client base. In fact, the conflict between the client and the debtor is primarily disadvantageous for the Factor, because its remuneration depends on the Supplier's turnover. For the Buyer, only the payment order details are changed. In modern Russia, factoring is not yet as widespread as in the West, so some Suppliers encounter misunderstanding on the part of Buyers when signing notifications, because the bank appears to them as “people in an armored car and with machine guns.” Confirmation that the factoring scheme is convenient not only for the Supplier, but also for the Buyer is that Russian operators of the factoring market successfully interact with such well-known trading organizations as the Ramstore shopping center, Felma LLC (the Kopeika supermarket chain), GUM , TSUM, other large department stores and supermarkets. If we talk about the advantages of factoring for the Buyer, they are not so obvious, but here are some of them:

Obtaining a trade loan (deferred payment), if it was not previously provided by the Supplier due to a lack of working capital or an unacceptable level of risk for it. If there is a deferred payment, the possibility of increasing its term;

Obtaining more preferential prices (discounts, etc.) by improving the solvency of the Supplier itself in its settlements with counterparties.

Expanding the range of goods (services) sold, which entails attracting new customers and, as a result, increasing sales and business profitability.

4. Advantages of factoring

Factoring is an indispensable financial tool for new and small companies, as well as for companies that have chosen bank lending limits, because factoring is an unsecured form of financing that does not require a credit history. This does not mean that factoring is not needed by large companies. For example, Parmalat, with the help of factoring, has become a well-known manufacturer and continues to actively use it to this day. Also, large industrial holdings in the West (General Electric, Fiat) establish their own factoring companies that engage in intra-company factoring, that is, financing the supply of components on trade credit terms. Among Russian companies that have introduced factoring into their business, we can note such well-known manufacturing companies as the Red October confectionery factory, Salmon International CJSC (frozen foods). You can also name a number of large wholesalers and distributors. These are TK Mistral CJSC (Heinz, Green Giant), Vigo Lux CJSC (DIM underwear), Rusmed M LLC (household chemicals), Stupeni-opt LLC (dairy products) , CJSC "Pharmacy Holding" (medicines). Most of the above companies are suppliers of food or consumer goods. This is due to the fact that such goods are the most liquid and their turnover is not so high. So, let's look at the benefits of factoring for the Supplier.

Factoring is one of the sources of financing the operating activities of an enterprise.

Factoring is a long-term agreement under which an intermediary (factor) acquires the accounts receivable of an enterprise, assumes the risk of non-payment on any of the accounts and is responsible for ensuring that money is received for payment.

The factor also conducts a credit check on all clients. The factoring company buys from the supplier company its payment documents for the amount S and thereby assumes the obligation to recover the entire amount from the buyer, taking into account late fees. A typical scheme of factoring operations is shown in Fig. 13.8.

Fig, 13.8. Factoring process:

1 - delivery of goods on credit; 2 - the agent issues an invoice to the buyer; 3 - payment of an advance payment (up to 80% of the principal amount); 4 - the buyer returns the money to the agent; 5 - payment to the company of the remaining 20% ​​minus commission to the factor and interest on the loan

The differences between factoring and credit are listed in table. 13.6.

Differences between factoring and credit

Table 13.6 Factoring Credit The supplier does not transfer a certain amount to fulfill its obligations, but transfers a certain right (right of claim) The debtor transfers a certain amount to the creditor to fulfill his obligations Factor income - discount between the amount issued to the supplier and the amount received from the debtor Lender's income - periodic payments as a percentage of the loan amount The amount of money transferred to the supplier is returned by the debtor - a third party The debt is returned by the person who received the loan, although the possibility of fulfillment of obligations by a third party is not excluded

where 5 is the amount paid by the factoring company

to the client; r - interest rate for operations of similar risk; T is the duration of the factoring agreement.

There are two forms of factoring. According to the first of them - traditional factoring - the factor performs the function of lending money, making advance payments even before the receipt of money from debtors. The factor typically pays 70-90% of the invoice amount upfront and charges interest at a rate that is 1-1.5% higher than for conventional borrowers. The remaining amount acts as an insurance fund and is paid if the consumer enterprise pays the payment documents in full, thereby insuring the risk of consumer refusal to accept or bankruptcy. The amount of the advance depends on the degree of dilution of accounts receivable due to the presence of doubtful debts, slow turnover, etc. The share of the insurance fund can be determined as the standard deviation of the data obtained using the following formula:

where S3 is the amount spent by the bank on the acquisition of receivables; Sn is the amount received by the factor after the end of the factoring agreement.

In the second form - term factoring - the factor does not lend money. The enterprise and the factor agree on the limits of the loan and establish a periodically updated average period for the factor to receive money from all debtors. The factor pays the company amounts based on the agreed period, regardless of whether the client has paid the factor or not. For example, at the end of a normal 30-day period, the debtor paid only RUB 5 million. on an account for a total amount of 10 million rubles. The factor transfers the entire amount of the invoice to the enterprise, and charges interest on the remaining amount of the debt. This type of factoring allows you to insure against doubtful debts.

Thanks to the use of factoring, an enterprise can:

Accelerate the turnover of working capital and thereby reduce the need for financing;

Limit the amount of expenses associated with servicing loans, collecting accounts receivable and accounting for them;

Protect yourself from doubtful debtors.

The main advantages of factoring are listed in

table 13.7.

Advantages of factoring

Table 13.7 Provider Buyer Factoring company Increasing sales volume Obtaining a trade loan (deferred payment) Income growth due to interest on loans, payment of commission services, interest on turnover for risk Increase in the number of buyers Eliminate the risk of purchasing low quality goods Security competitive properties Expansion of procurement Strengthening relationships with counterparties Possibility of providing customers with preferential terms of payment for goods Strengthening market positions Strengthening market positions Acceleration of working capital turnover Better use of working capital Expanding the range of services for clients Strengthening the financial position Increase in the number of clients Diversification

The main component of the effect of factoring is the receipt of money immediately after shipment of products, and these funds are the enterprise’s own funds, and not borrowed.

Issues for discussion

1. What is the difference between different types of working capital management policies? At what stages of the life cycle can one or another type of working capital management policy be used?

2. What factors influence the company's need for working capital? How can the influence of these factors be taken into account when managing working capital?

3. What cash flows arise when providing discounts to companies? How can you calculate the feasibility of providing discounts?

4. What tools can be used to manage accounts receivable? I I