Debt collection under the factoring contract

A factoring contract is becoming an increasingly popular tool for entrepreneurs who seek to improve their liquidity and protect themselves from non-payment by debtors. However, as in any agreement, conflict situations related to debt collection may arise in it.

Below we will consider in detail the nuances of debt collection under a factoring agreement that your business may face. Having read this information, you will be able to better prepare for such problems and take measures to effectively solve them.

What is a factoring agreement?

Factoring is a financial agreement under which a company (factor) buys its receivables from a seller (supplier) for a certain fee. This allows the seller to receive cash immediately without waiting for payment from their customers (buyers).

Factoring can be beneficial for both parties:

• For the seller: he gets quick access to funds, improves his liquidity and reduces the risks associated with non-payment.
• For the factor: he earns commission income and can diversify his asset portfolio.

Peculiarities of debt collection under a factoring contract: the main difficulties

Debt collection under a factoring contract has a number of features that distinguish it from other types of debt collection:

1. Parties to the contract: the debt will be collected by the factor, not the seller who concluded the factoring contract.
2. Grounds for collection: the factor has the right to demand payment from the debtor on the basis of the factoring contract and primary documents confirming the delivery of goods/services and their value.
3. Collection measures: A factor can use all legal methods of debt collection like any other creditor.

However, in addition to these features, factoring can bring certain difficulties in debt collection:

1. Insolvency of the debtor: If the debtor turns out to be insolvent, the factor can lose a significant part of its funds.
2. Dispute by the debtor of the debt: the debtor can dispute the very fact of the debt, its amount or the grounds for its collection.
3. Complex legal procedures: the process of debt collection can require significant time and financial costs, as well as in-depth knowledge of the law.

Methods of debt collection under a factoring contract with the help of a lawyer

A lawyer with experience in factoring can help you effectively collect a debt from a debtor using the following methods:

1. Pre-trial settlement: a lawyer will negotiate with the debtor for the purpose of voluntary repayment of the debt.
2. Foreclosure: If a pre-trial settlement is not possible, the attorney will file a lawsuit and represent your interests in the lawsuit.
3. Enforcement: A lawyer can take steps to enforce an action, such as seizing the debtor’s property.
4. Execution of the court decision: after receiving the court decision, the lawyer will help you in its execution, that is, in collecting the debt from the debtor.

Debt collection under a factoring agreement can be a complex and time-consuming process that requires knowledge of the law, experience in this field and understanding of the nuances of factoring agreements. Solving such problems on your own can lead to loss of time, money, and sometimes the debts themselves.

Why should you contact a law firm?

Recovery efficiency and speed:

• Experienced lawyers know how to correctly draw up all the necessary documents, take measures to secure a claim, as well as negotiate with the debtor and represent your interests in court.
• Thanks to the knowledge of legislation and court practice, lawyers can choose the optimal debt collection strategy, which will allow you to save time and get a result as quickly as possible.

Protection of your rights and interests:

• A law firm will be by your side throughout the debt collection process, protecting your rights and interests.
• Experts will help you avoid mistakes, and will also check the legality of all actions performed in relation to you.

Reducing risks and costs:

• Contacting lawyers in the early stages of the problem allows you to minimize the risks associated with debt collection and save your money.
• Lawyers will help you correctly assess the situation, plan actions and optimize debt collection costs.

Competence and experience:

• Professional lawyers who specialize in debt collection under factoring contracts have in-depth knowledge of legislation, court practice and subtleties of factoring agreements.
• They have the skills of conducting negotiations, representing interests in court and working with executive documents.

Peace of mind and confidence:

• By contacting lawyers, you can be sure that your case is in safe hands.
• You will not need to study legal nuances, worry about complex procedures and be responsible for making important decisions.

Contact our law firm “Prykhodko and Partners” right now to get professional help in collecting debts under the factoring contract. We will help you get your money back quickly, efficiently and legally.

If you want to order a consultation or find out the cost of legal support, fill out the form below.