Factoring

Factoring involves a business transferring receivables to a factor, often in exchange for immediate liquidity and sometimes collection or credit-risk services. In Switzerland, the legal basis is usually assignment of claims, combined with financing and service elements. The contract determines whether the factor assumes debtor default risk, whether the arrangement is disclosed to debtors and how collections are handled. Restrictions on assignment, set-off rights, data protection, insolvency risk and accounting treatment are central. Factoring differs from a secured loan, though economically both may finance working capital.