Theory about factoring service

Author:Burhan Rexhepi
Position:University of Business and Technology - Kosovo
Pages:78-87
Vo
l.
6
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o
. 1
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arc
h,
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A
cademic Journal o
f
Business,
A
dministration, Law and Social Science
s
II
PCCL Publishin
g
, Graz-
A
ustri
a
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SSN 2410-391
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cces online at www.ii
p
ccl.or
g
78
Theor
y
about factoring service
Dr. Burhan Rexhe
p
i
niversity o
Business and Technology - Kosovo
Ab
str
a
c
t
F
actorin
g
is one of the oldest and common methods of trade nance over the world with a lon
g
historical development.
A
ccording to historians, Factoring is originated 4,000 years ago in the
d
ays of King Hammurabi of Mesopotamia whereby the rst literate societies were developed.
A
lthough Mesopotamia no longer exists, many of its great contributions to civilization have
e
ndured, includin
g
Factorin
g
.
The rst documented-use of factoring was widespread occurred in the
A
merican colonies
b
e
f
ore the revolution to serve
f
or trade. With the abundance o
f
the North
A
merican landscape,
colonists cultivated and traded commodities like co on, fur and timber with the
E
uropeans.
I
n brie y, Factoring is the sale and purchase a receivable with a certain discount rat
e
.
H
owever,
factoring is not simply one homogenous product because the factors also o er a range o
f
professional nancial services that might typically include: (i) Collecting payments from their
customers, (ii) Pursuing late payers, (iii) Providing advice to clients on credit management,
(iv) protecting the client against bad debts. The di erence among these de nitions is how
m
any services to provide by the factors.
I
n a recourse factorin
g
arran
g
ement, the factor has a ri
g
ht to recover the funds from the seller
i
n case of default payments as the seller takes the risk of any bad debt losses himself. The
f
actor char
g
es the seller
f
or maintainin
g
the sales led
g
er and debt collection services and
charges interest on the amount drawn by the client (selling
rm)
f
or the period. This is the
m
ost common type factoring. Recourse factoring is o ered at a lower interest rate since the
r
isk by the factor is low.
I
t’s highly suited for factoring arrangements at high risk markets as
well as for factors at the rst phase of entrance into the market as they’re lack of experience
and meet di
culties in accessing buyer ’s credit- worthiness
.
K
e
y
words:
F
actorin
g
service,
K
osovo,
EU
.
I
ntr
odu
ct
io
n
K
osovo is
d
ee
ply
integrating into g
l
o
b
a
l
econom
y
, es
p
ecia
lly
since it
b
ecame an
in
d
e
p
en
d
ent in 1999. Kosovo’s
p
osition em
ph
asizes increasing
ly
as a
l
ig
h
t growt
h
e
conom
y
in
E
uro
p
e. The integration creates breakthroughs
f
or higher develo
p
ment
b
ut also brings man
y
threats to overall econom
y
as well as each economic industr
y
.
B
anking industr
y
is not out o
f
this trend. Diversi
cation o
f
services and kee
p
ing the
c
om
p
etitive advantages is the survival
f
or Kosovo commercial banks, es
p
eciall
y
joint
stock banks (JSCBs) which have serious
p
roblems o
f
a tin
y
ca
p
ital base and weak
op
eration.
The small and medium enter
p
rises (SM
E
s) - the targeted customers o
f
JSCBs are
p
la
y
ing an im
p
ortant role
f
or develo
p
ment o
f
econom
y
in Kosovo. SM
E
s have
c
ontributed to create increasing GDP, creating jobs and increasing national’s ex
p
ort
volume.
I
t said that SM
E
s have currentl
y
contributed 60
p
ercent o
f
GDP and em
p
lo
y
s

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