Factoring refers a financial transaction where a business sells
their account receivable to a third party which is called a factor
at a discount in exchange for immediate money with finance
continued business. In respect that, factors usually establish a
credit line with clients and designate the amount of credit that
their clients can propose to customers. The factoring industry has
the majority of small and medium sized companies, so there is
sensitive to undulation in economic activities. Thanks to global
markets, Turkish factoring companies become to rise in economic
activities which provide three main services to their customers.
These are discounting, collection and guaranteeing of domestic and
also international future receivables with the assignment of
receivables to the factory company. Factoring services have four
main functions. Firstly, finance for the supplier who the factoring
pays the client the amount essential for his working in exchange
for his in voices. Secondly, in order to maintenance of the
receivables account and the factoring company run the trade debt of
the client who keeping the sales accounts ledgers and sending out
the invoices. Thirdly, the factory company collects the payments
due from the debtors of the client in collection of receivables.
Lastly, the factoring company carriers the risk of any bad debt for
protection against the default in payment by debtors.
Popularity of energy in factoring sector
According to BDDK statistics, in 2012 there are three energy
sectors (nuclear fuel, petroleum products, coal) which are total
factoring volume are increased to 3.5 billion TL from 1.3 billion
TL. In addition to this, these three energy sectors impact the
total share of factoring receivables to 17.9%. In particular,
escalating of energy sectors enable investor to benefit from
factoring services. Turkey involves in energy sectors which reflect
the rate of factoring sector.
Factoring Companies Benefit from being Bank's
There are 14 bank's subsidiaries factoring companies
operating in Turkey. These benefit from less equity capital and
also provide much more loan facilities in comparison with
independent factoring companies. On the other hand, financial
controlling mechanism was necessary for the account receivables
against bad debts and accuracy of financial statements and ratios.
In connection with comprehensive audit reporting system target, new
by law has been published in Official Gazette.
New Accounting Standards will bring transparency to factoring
Pursuant to new by law code 123 factoring firms shall issue
their consolidated and non-consolidated financial statements
together with independent audit report following confirmation of
general assembly within seven days. These documents shall be
accessible for five years. Furthermore, factoring firms are
required to make provision for uncollectible receivables.
20% provision should be made for receivables that are not
collected between 90-180 days.
50 % provision shall be made for both capital and interests
that are not obtained up to 1 year
If the maturity of payment is overdue for more than 1 year,
100% provision shall be made.
Under Regulation (EU) No. 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories ("EMIR")...
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