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Companies: accelerated factoring scheme extended

Published on March 10, 2021 by Pierre Belhache - 2 mins reading time
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Introduced in September 2020, the accelerated factoring scheme, which enables companies to obtain financing as soon as orders have been taken, has been extended until June 30, 2021.

Accelerated factoring: pre-financing as soon as the order is placed

To help companies cope with the health and economic crisis, the French Ministry of the Economy and Finance introduced an accelerated factoring scheme in September 2020.

"A company that receives an order will be able to obtain a financing line from its factoring company, benefiting from the State guarantee, without waiting to have issued invoices upon delivery of its service," states the order published in the Journal Officiel on September 8.

To obtain pre-financing from the factoring company, companies no longer have to wait for the order to be delivered and the invoice to be issued: all they have to do is send a signed quotation to the financial institution as soon as the order is placed. This system also works for public and private contracts.

The State guarantees the operation for 70% to 90% of the total amount, the percentage varying according to the size of the company. This State guarantee is not free of charge, but "remunerated by guarantee fees according to a scale that depends on the size of the company and the maximum periodicity of the financing it covers", as the order explains. The fees are charged by Bpifrance to the factoring companies.

Initially reserved for orders taken between August 1 and December 31, 2020, the accelerated factoring scheme has been extended by 6 months, and will therefore remain in place until June 30, 2021.

How does factoring usually work?

Factoring is a financing solution in which a company transfers its receivables to a specialized company known as a factor. In exchange for a commission, this company then handles the dunning and collection of the receivables.

In concrete terms, the company draws up the invoice for its customer (who cannot be a private individual), and sells it to the factoring company, which takes its commission and pays the remaining amount to the company, then handles collection.

This solution is particularly attractive when the economic climate is unfavorable, and payment delays are mounting. With factoring, companies can safeguard their cash flow without fear of non-payment, since many factoring companies offer to set up a guarantee fund.