Factoring dictionary


The subtotal transferred immediately upon receipt of the client’s invoice to be factored, usually 80 percent of the purchase price.


The vendor of goods or service provider (obligee) may transfer an account receivable from their debtor (buyer) to a third party. An agreement governing the transfer and the assignment of the receivable are both required in order to lawfully transfer a receivable. Assignment is an agreement between the assignor (vendor) and the assignee (factoring company), through which the assignee takes the assignor’s place in dealings with the debtor.

Banking costs

The cost of the bank transfer stemming from the factoring transaction, to be covered by the client as stipulated by the terms of the contract.

Client (vendor)

The factoring company’s partner (assignor) who delivers the given good or provides the given service, and who assigns the account receivable from the debtor (buyer) to the factoring company.


The liability or asset pledged as security for the factoring agreement, which serves to compensate the contractual obligee in case of non-payment by the contractual obligor. To be accepted as collateral, the liability or asset must be tradable, must have value and must be independent of the debtor’s financial position.

Confidential banking information

All facts, information, solutions or data available to the factoring company related to the individual clients, their personal information, financial situation, business activities, management, ownership structure, business network or the balance of their accounts held at financial institutions, their transaction history or the details of any of their contracts concluded with such financial institutions. 

Contracting fee

A one-time fee payable by the client, due upon conclusion of the agreement.

Debtor (buyer)

The particular partner (buyer) of the factoring company’s client who has a payment obligation for the client’s delivery of goods or provision of a service based on an outstanding invoice.

Factor(ing company)

The financial institution or financial corporation which factors the invoice to finance the fixed-term receivable for the client, and which takes that client’s place in dealings with the debtor based on the assignment of the receivable.

Factoring fee

The percentage fee calculated based on the client’s gross factored turnover. The factoring company sets the factoring fee taking into account the following factors: volume of turnover, buyer-vendor risk, number of invoices to be factored, the scale of the amounts involved, payment diligence, payment discipline, number of buyers and payment deadline. The factoring fee is due on the date of the assignment of the individual receivables, or, if an advance is paid, on the date of its payment.


The regular advance payment and management of our partners’ short-term receivables for the delivery of goods or the provision of services. It is important to note that factoring financing can only take place prior to the due date of the invoice, and only if delivery/performance is confirmed.

Factoring limit

The revolving credit limit the factoring company provides the client, the maximum possible sum of contemporaneous factoring advances at any given point in time.

Factoring interest rate

Annual interest rate on the amount advanced, calculated for the exact number of days that a given invoice is outstanding. It is based on the official BUBOR rate as published by the National Bank of Hungary and a margin (+…%) as set out in the factoring framework agreement.

First-loss guarantee

A type of guarantee where the factor company can turn to the guarantor for payment of the purchased receivable in case of the debtor’s non-payment. The guarantee - as an additional security - is set out in the factoring agreement or in a separate complementary agreement. In special cases, Garantiqa Hitelgarancia Ltd. or the Rural Credit Guarantee Foundation (Agrár - Vállalkozási Hitelgarancia Alapítvány, AVHGA) may be involved to provide a first-loss guarantee. Garantiqa Hitelgarancia Ltd. or AVHGA perform a credit assessment on the client, and if the first-loss guarantee is subsequently provided, the related fee is payable by the client.

Insurance fee

The sum set out in the insured factoring framework contract concluded between the factoring company and its client as a percentage of the volume of insured accounts receivable.

Insurance limit

The maximum risk the insurance company is willing to bear, in the form of a credit limit defined for the individual debtor (buyer), which, along with the factoring limit, also defines the cumulative value of the vendor’s invoices which may be assigned in the course of factoring transactions covered by the insurance policy.

Late payment interest

The interest rate calculated for each day past due in case of late payment by the buyer, currently set at 7% annually over the factoring fee and interest rate.


The remaining part of the purchase price - beyond the sum paid out in the form of advances - from which the factoring company has, upon payment of the original receivable, already deducted interest and other fees in accordance with the agreement. The factor transfers the amount of the remainder to its client’s account.

Purchase price

The gross value of the invoice after the deduction of allowances, amounts withheld by the buyer and all other lawful reductions.

Right of recourse

The factor retains its right to reclaim the advance paid to the vendor in case of the buyer’s non-payment or under other extraordinary circumstances as set out in the agreement.

Settling accounts

Upon the buyer’s (debtor’s) fulfillment of their financial obligations at the due date, the factor settles accounts with its client, deducting the sum of the advances previously transferred to the partner and the costs of factoring from the gross invoice amount received. Upon receipt of payment, the factoring company transfers the remaining amount (remainder) to the vendor. The factor compiles an account of all deducted fees and costs and sends that to its client as well.