Analyzing the Foundations of Financing through Factoring with a Risk Management Approach

Abstract

Objective: The aim of the present study is to analyze the foundations of financing through factoring with a risk management approach. Methodology: The research method is descriptive-analytical, utilizing library resources. Findings: Financing through factoring is conducted within the framework of a contract involving two parties: the seller and the factor. In other words, the factoring contract materializes through an agreement between the factor and the seller. Signing this contract establishes a contractual relationship between the seller and the factor.  Findings indicate that, although financial risk is not inherently positive, understanding it leads to better and more informed decision-making in trade or investment, helping to evaluate value in terms of the risk-reward ratio. Among the advantages of issuing commodity factoring notes are financing for producers, liquidity of receivables before their due date, encouraging credit sales guaranteed by exchanges, directing societal savings toward the real economy, providing essential raw materials for intermediate and final consumers through deferred payments, exemption from income tax, and supporting the industrial sector by attracting public investments. Conclusion: If this instrument becomes common, it is likely to extend the maturity dates of long-term credit sales.