The Bao Lyon Group, LLCFactoring & Financing

What is the Financial Factoring?

Factoring is a financial solution where a business, particularly Small and Medium Businesses (SMBs), sells its accounts receivable (unpaid invoices for products or services) to a financial institution called a factor. This process allows the business to receive an immediate cash advance, typically a percentage of the invoice value (often 65-75%)**, rather than waiting for the customer to pay the invoice*. The factor then handles the collection of the invoice from the customer. Once the customer pays the invoice in full, the factor remits the remaining balance to the original business, after deducting its commission or factoring fee.

How it works

Invoice creation and sale: The business delivers a product or service, generates an invoice, and then sells this invoice to a factoring company.
Advance payment: The factoring company provides an upfront payment, typically 70-90% of the invoice value.
Collection and final payment: The factoring company collects payment from the customer and then remits the remaining balance to the business, less its factoring fee.

What are the functions of the factoring company?

A factoring company performs several crucial functions to help businesses manage their finances and improve cash flow.

Key functions

Purchase receivables: The core function involves buying a business's invoices (accounts receivable) at a discount.
Provide advance payment: Factors advance a percentage of the invoice value upfront, typically between 70% and 90%.
Collect payments: The factoring company assumes responsibility for collecting payments directly from the customer.
Credit risk mitigation: In non-recourse factoring, the factor absorbs the loss if a customer becomes insolvent and cannot pay.
Manage currency risk: When dealing with international trade, factoring companies specializing in export factoring can manage currency fluctuations.

Additional services

Credit checks and analysis: Factors often perform credit assessments on customers, helping businesses make informed decisions about extending credit.
Accounting and reporting: Factoring companies can take over portions of the accounting work related to receivables, including providing financial reports.

Advantages and disadvantages

Advantage

Improved cash flow: Factoring provides immediate access to cash tied up in receivables, helping businesses cover expenses like payroll and supplies.
Not a loan: Factoring is a sale of an asset (the invoice), not a loan, so it doesn't create debt on the balance sheet.
Easier qualification: Approval is primarily based on the creditworthiness of the customer, making it accessible to businesses with limited credit history.
Reduced credit risk: In non-recourse factoring, the factor assumes the risk of customer non-payment due to insolvency.
Outsourced collections: The factoring company handles collections, freeing up the business's resources.

Disadvantages

Cost: Factoring fees can be higher than traditional loan interest rates.
Customer relationships: The factoring company will communicate with the customer, which could potentially impact the relationship.
Scope: Factoring only addresses cash flow gaps related to slow-paying invoices.

(*) This solution has regional and market-specific availability. Please contact our offices to verify if your location is eligible.
(**) The percentage will fluctuate according to the geographical location of the debtor and its financial situation. Please consult with our offices for details.

Letters Rogatory

Letters rogatory, also known as letters of request, are formal requests from a court in one country to a court in another country seeking judicial assistance. The most common forms of assistance sought through letters rogatory are:

Service of process: This involves the official notification of legal documents to individuals or entities in the foreign country.
Taking of evidence: This refers to gathering testimony or documents from witnesses located in the foreign country for use in legal proceedings in the requesting country.

In cases where direct transmission between courts is not possible, letters rogatory may require the involvement of diplomatic or consular channels for transmittal.
This method is generally used when there are no treaties or agreements between the two countries to facilitate the requested judicial assistance. It is important to note that executing these requests can be a lengthy process due to the involvement of diplomatic channels and the need to follow the judicial procedures of the requested country.

Service by Agent

A process server is a neutral, third-party professional tasked with delivering legal documents to defendants, witnesses, or other parties named in a legal action. This delivery, or "service of process," is a crucial component of due process, as it formally notifies individuals of legal proceedings and their obligation to respond.

Role and function

Deliver legal documents: Process servers deliver a range of documents, including summonses, complaints, subpoenas, writs, and eviction notices.
Verify proper service: They must ensure that documents are served in accordance with the laws of the relevant jurisdiction. Different states and countries have distinct rules governing who can be served, and when and where delivery can occur.
Provide proof of service: After successful delivery, the process server completes an affidavit of service, which is filed with the court as evidence that the documents were served correctly.

Domestic and international service
Process-serving can be complex, especially when legal matters cross borders.

Domestic service: The server must comply with the specific rules and regulations of the local jurisdiction.
International service: This requires navigating treaties like the Hague Service Convention or using Letters Rogatory, depending on the country. It often involves different government channels and translation requirements.

Translation & Authentication Services

Leveraging our global network of service providers, we offer high-quality document translation services in over 75 languages. For documents requiring legal recognition, our partners are qualified to handle all authentication requirements, ensuring your translated documents are accurate and legally compliant.