FACTORING AGREEMENT AS AN ALTERNATIVE SOURCE OF FINANCING FOR SMEs
ALTERNATIVE FINANCING SOURCE FOR SMEs AND ITS JUDICIAL CLAIM

A factoring agreement is a contract through which a company (assignor or client) transfers its outstanding commercial receivables to a specialized financial institution (factor). In return, the institution advances a portion or the full amount of the receivables, assuming or not the risk of non-payment. This type of contract serves as a financing tool, enabling companies to quickly obtain liquidity without waiting for the maturity of their receivables. This is critical for the efficient management of factoring and claims.

There are several types of factoring; however, two stand out:
a) Recourse Factoring: In this modality, the factor does not assume the risk of non-payment. If the debtor fails to pay the receivable, the client (assignor) is obligated to reimburse the factor for the advanced amount. This option is suitable for companies seeking financing but capable of managing the insolvency risk of their debtors.
b) Non-Recourse Factoring: Here, the factor assumes the risk of non-payment. If the debtor fails to pay, the financial institution has no right to demand reimbursement from the client. This type of factoring generally involves higher costs due to the additional risk assumed by the factor.

To formalize a factoring agreement, the following elements are typically required:

1. Assignment of Receivables: The client company must assign collection rights to the factor, which must be clearly specified in the contract.
2. Determination of Advance Amount: Generally, the factor does not advance 100% of the receivables' value; instead, a percentage is advanced, with the remainder retained as a guarantee.
3. Payment of Fees and Costs: The factor’s fees and administrative or collection management expenses must be clearly defined, including any applicable interest for fund advances.
4. Assumption of Non-Payment Risk: The contract must specify whether the factoring is with or without recourse, determining if the client retains responsibility in case of debtor default.
5. Receivables Documentation: The client must provide documentation supporting the existence and legitimacy of the receivables, including invoices and commercial contracts, ensuring they are valid and enforceable.
6. Confidentiality and Notification: It must be clarified whether the factoring is confidential and, if so, the conditions for managing information and the lack of notification to the debtors.

For these reasons, factoring is a valuable tool for companies seeking to optimize their cash flow and reduce collection times, although its suitability depends on the costs and the type of risk the company is willing to assume.

Furthermore, factoring represents a key alternative financing tool, particularly relevant for companies facing challenges accessing traditional bank loans or seeking ways to optimize cash flow without incurring additional debt. In this context, the importance of factoring as a financing mechanism is highlighted in the following aspects:

1. Immediate Liquidity Improvement: By anticipating the collection of invoices or pending accounts, companies can quickly obtain liquidity, enabling them to meet operational obligations (such as supplier payments, payroll, or asset investments) without waiting for the maturity of commercial receivables.
2. Credit Risk Reduction: In non-recourse factoring, the factoring entity assumes the risk of non-payment, allowing companies to transfer the burden of potential defaults and focus on productive activities with greater financial security.
3. Balance Sheet Optimization: Unlike other forms of financing, factoring is not recorded as debt on the balance sheet; instead, it involves the sale of assets (receivables). This improves the company's leverage ratio and financial indicators, making it more attractive to future investors or financiers.
4. Flexibility and Scalability: Factoring adapts to the company's growth, as the available financing volume increases in parallel with sales. This facilitates controlled expansion, with financing growing as the company generates new commercial receivables.
5. Efficient Credit and Collection Management: Companies opting for factoring delegate collection management to the financial entity, reducing administrative burdens and associated costs in the recovery process. Additionally, the factor, as a specialized entity, often employs effective collection methods, improving recovery rates.
6. Accessible Alternative for Growing Companies: For many SMEs or startups, accessing bank credit is complex due to requirements like credit history or guarantees. Factoring, in contrast, is based on the quality of commercial receivables, making it an accessible option for companies in growth phases or with limited guarantees.

Conclusion
Factoring has established itself as a strategic solution for corporate financing, enabling a steady cash flow without resorting to bank debt and contributing to the financial sustainability and autonomous growth capacity of businesses.

JUDICIAL CLAIMS FOR NON-PAYMENT ARISING FROM A FACTORING AGREEMENT

Judicial claims in a factoring agreement occur when the factor seeks to enforce payment of assigned receivables that remain unpaid or when the client (assignor) fails to comply with the contractual conditions.

To initiate such a claim, the following steps should be considered:

1. Review of the Contract and Receivables Documentation
   The factor must carefully review the factoring agreement and the documents supporting the assigned receivables, such as invoices and agreements with the debtor. The documentation should demonstrate the legitimacy and enforceability of the receivables. Additionally, the contract must specify whether the factoring is with or without recourse, as this determines the ultimate responsibility for payment.
2. Extrajudicial Payment Demand
   Before resorting to judicial action, it is advisable to send a payment demand to the debtor, informing them of their obligation to satisfy the receivable assigned to the factor and granting a reasonable period to resolve the situation. This demand may suffice to secure payment without initiating legal proceedings and, if unsuccessful, will serve as evidence of the factor’s diligence in claiming the debt.
3. Judicial Procedure for Claiming Amounts
   If the extrajudicial demand is not honored, the factor may initiate the corresponding declaratory procedure to claim the amount. Depending on the type of factoring, the procedure may be directed against the client or the assigned debtor.

In this context, we identify:
a) Recourse Factoring Claims: The factor can claim the amount of the debt from the client (assignor) in case of debtor non-payment. In this case, the lawsuit is filed against the client under the contract, seeking compliance with the reimbursement obligation for the advanced credit. Defense strategies for the client may include reviewing the contract terms and the creditworthiness of the original debtor.
b) Non-Recourse Factoring Claims: The factor, having assumed the non-payment risk, is solely responsible for recovering the debt directly from the debtor. In this type of contract, the client (assignor) is exonerated from responsibility in case the debtor fails to fulfill their payment obligation.

Conclusion
Judicial claims in a factoring agreement require precise management of the contract and receivables documentation, as well as a clear strategy to efficiently recover the debt. It is advisable for the factor to engage a legal expert specializing in commercial law to ensure compliance with legal and procedural requirements.