What risks does the factor take on?
The A.S.F.’s answer: At the company’s request, the factor can guarantee the risk of insolvency of its clients up to 100% of its accounts receivable. In the event of a claim, the company will be indemnified immediately within the limit of the agreements previously issued. When the factor decides to limit the amount outstanding of the guarantee requested for some clients, he always does it with full knowledge of the facts. This is because Trade receivables Finance companies have extremely complete commercial information. So they know the financial situation of companies thoroughly and benefit from the experience that only they can have of companies’ payment behavior. This know-how cannot be replaced. So when they choose not to commit themselves for a client, they give precious advice to executive managers. Executives that have taken their factor’s advice observe that in the vast majority of cases, his position is well-founded. In conclusion, accounts receivable can be guaranteed up to 10
