Domestic Factoring

Armswissbank is one of the first financial institutions operating in Armenia that has implemented and developed factoring as an effective tool of short-term trade finance. The Bank offers wide range of factoring services suitable for needs and requirements of each client.

Factoring is a financial transaction in which the client assigns the collection rights of its accounts receivable to the Bank at a discount.

Factoring includes the following services:

  • Financing sales on deferred payment terms
  • Accounts receivable administration
  • Collection of accounts receivable
  • Protection against buyers’ default

A sample of factoring transaction is displayed below:

1. The seller (the Bank's client) delivers the goods to the buyer (debtor) on deferred payment terms and issues the invoice

2. The seller then presents the invoice and the delivery documents to the Bank

3. The Bank pays the seller the main part of the invoice amount (up to 90%) and charges the commission

4. On due date the buyer pays the Bank the total amount (100%) of the invoice

5. The Bank pays the seller the remaining 10% of the sum, less the accumulated interest for the financing.

The advantages of factoring

Advantages for sellers

  • Opportunity of increasing working capital in short terms by assigning the accounts receivable
  • continuous growth of financing together with growth of sales
  • growth in production and/or trade volume due to availability of funds
  • the opportunity to offer the buyers deferred payment terms, thus expanding the number of buyers and increasing market share
  • improvement of tax discipline - the client receives necessary funds to make the tax payments which arise from delivered goods which are not yet paid for
  • avoiding or minimizing losses arising from the fluctuations of the exchange rates
  • administration of accounts receivable upon client’s request
  • protection against buyer’s default (in case of non-recourse factoring).

Advantages for buyers

  • Working with sellers on deferred payment terms
  • increasing the volume and assortment of products without involving additional capital
  • managing temporarily available funds by working on deferred payment terms (instead of paying interest for a bank loan)
  • decreasing expenses of financing the payment for goods delivered (the seller pays for the factoring services).

ARMSWISSBANK offers the following types of domestic factoring

Recourse factoring – In case of recourse factoring the Bank has the right to collect the unpaid invoice amount from the seller i.e. the seller guarantees proper, complete and timely repayment of buyer’s obligations to the Bank.

Non-recourse factoring – In case of non-recourse factoring the seller does not carry any obligations to the Bank and doesn’t guarantee the repayment of buyer’s obligations.

Non-notification factoring (Accounts receivable financing) – In case of non-notification factoring, the buyer is not notified about the factoring transaction; the seller is the only responsible party for proper repayment of buyers’ debt.

Factoring-Guarantee – In case of Factoring-Guarantee the Bank does not provide financing to the seller and only ensures the seller that the liabilities of the buyer will be met properly, completely and timely according to the sales contract.

Domestic factoring tariffs*

The authorized body approving the factoring limit (the maximum amount of factoring that can be provided to the seller for a certain buyer) takes into consideration the following objective and subjective factors;

Objective factors

Client’s and/or seller’s experience, history of cooperation with the factoring partner, financial statements, accounts’ turnover, volume of potential transactions, credit history, etc.

Subjective factors

Client's and/or buyer’s activity’s compliance with the Bank's policies, transparency of client’s/buyer’s business, quality of management, further cooperation perspectives, etc.

Factoring limit is provided according to the General Terms (in Armenian) however the authorized body approving the limit can renounce from these terms, or propose individual conditions and/or requirements considering the above mentioned objective and subjective factors.

Possible negative consequences

In case the client fails to perform his factoring obligations (falling into arrears, providing fake information or refusing to provide information, worsening of financial situation according to monitoring results, etc.), the Bank can undertake the following measures;

  • termination of the factoring contract and financing, decreasing or closing the factoring limit
  • confiscation and realization of the collateral, moreover, if the revenue from the realization of the collateral is not enough for repayment, legal procedures may be held to foreclose other property of the debtor/guarantor (if applicable)
  • registering information about the debtor and the client (in case of recourse factoring) in Credit Registry, which will have negative impact on client’s/debtor’s credit history and will prevent from further access to lending services (including from other banks and credit organizations)

  • Necessary documents for receiving factoring limit (In Armenian)

    These tariffs are optional. The Bank offers individual tariffs for each client depending on the client’s and debtor’s financial situation, as well as on the potential number and volume of factoring transactions.