Factoring: Alternative Model of Financing

Topics: Asset, Balance sheet, Finance Pages: 26 (8065 words) Published: July 4, 2013
Ivanovic, Sasa, Suzana Baresa, and Sinisa Bogdan. 2011. Factoring: Alternative model of financing. UTMS Journal of Economics 2 (2): 189–206.

Preliminary communication (accepted April 2, 2011)

Sasa Ivanovic1 Suzana Baresa Sinisa Bogdan
Abstract: This paper aims to present factoring as an alternative funding model. This paper also tries to scientifically explore and emphasize its economic role thorough advantages and disadvantages of such financing model, and show condition in world and Croatia. Good corporate governance and professional financial management can contribute to the establishment of such business strategy (in terms of: strategy in relation to potential risks, the systems for managing risks and monitoring, investment strategies, interventions, etc.) that will make the company resistant to unexpected and unpredictable changes in both their environment and the global marketplace and timely actions to contribute to faster recover from the effects of the crisis and business damages reduced to a minimum recovery. Key words: factoring, receivables, liquidity, solvency, financing.

INTRODUCTION Global financial crisis points out the importance of a strong corporate governance and financial management for a company that has to deal with effects of unexpected crises and uncertainties that bear future business events. Effective strategic and tactical financial decisions based on principle politics effective financial management in the field horizontal and vertical structure of capital, insurance of short-term and long-term capital, maintaining liquidity and solvency, represents a key function in the creation of competitive advantages. The subject of this paper is factoring, as well as advanced and alternative model which is offered as one possible solution for overcoming the current lack of liquidity in the company and to improve the competitiveness, although factoring has been well known in the world in Croatia it haven't fully developed to its full potential. This work besides introduction and conclusion is divided into four main sections. In first part, entitled "Factoring: an alternative funding model" is defined and shown factoring as an alternative funding model which, by selling the receivables that make up a form of liquid assets, the entity can be financed. In the second part, entitled 1 Sasa Ivanovic, M.Sc.; Suzana Baresa, M.A.; Sinisa Bogdan, M.A., Faculty of Tourism and Hospitality Management in Opatija, University of Rijeka, Croatia.


Ivanovic, Sasa, Suzana Baresa, and Sinisa Bogdan. 2011. Factoring: Alternative model of financing. UTMS Journal of Economics 2 (2): 189–206.

"Modalities of factoring" are shown of the modalities that are commonly applied in practice of the factoring business and operation phases of domestic and international factoring. In the third part entitled "The economic role of factoring" and the importance of the economic role of factoring in the use of short-term financing of a business entity through the strong benefits of its application, and compared with short-term financing. In the fourth part, entitled "Factoring in the world and in Croatia" was analyzed and described the situation and the development of factoring in the world. It is shown turnover in 2010 year by continents tabular and graphic, and made comparison with the situation in Croatia and its trends.

FACTORING Factoring is a contemporary and specific form of short-term financing based on the selling short–term unsecured assets of the company to a specialized financial organization or company that specializes in factoring (factor) to pay certain fees or charges. In other words factoring is the purchase of others' claims (debts) that is a financial instrument that factor (factor-house, factor-company, factor-organization, a bank that has a separate department) financed by the business entity on the basis of future (outstanding) claims arising from the sale...

References: Bogdan, Sinisa, Suzana Baresa, and Sasa Ivanovic. 2010. Portfolio analysis based on the example of Zagreb Stock Exchange. UTMS Journal of Economics 1 (1): 39-52. Hrvatska agencija za nadzor financijskih usluga. 2010. Godisnje izvjesce (lipanj). Hrvatska agencija za nadzor financijskih usluga. 2011. Kvartalni bilten II, br.13. Hrvatska agencija za nadzor financijskih usluga. 2011. Kvartalni bilten I, br. 12. FCI. 2011. Annual Revie: Factoring: Exploring new horizons. Amsterdam: FCI. Ivanovic, Zoran. 1997. Financial management. 2. ed. Opatija: University of Rijeka. Kallberg, Jarl G., and Kenneth L. Parkinson. 1993. Corporate liquidity: Management and measurement. Homewood, Illinois: Richard D. Irwin, Inc. Karanovic, Goran, Sinisa Bogdan, and Suzana Baresa. 2010. Financial analysis fundament for assessment the value of the company. UTMS Journal of Economics 1 (1): 73-84. Klapper, Leora. 2005. The role of factoring for financing small and medium enterprises. World Bank Policy Research Working Paper 3593. NW: World Bank. Markovic, Ivan. 2000. Financiranje: Teorija i praksa financiranja trgovackih drustava. Zagreb: RRIF. Mishkin, Frederic S., and Stanley G. Eakins. 2005. Financijska trzista i institucije. Zagreb: MATE. Perman, Peter. 1984. Factoring: Passport to financial freedom. Industrial Management & Data Systems 84: 26–28. doi:10.1108/eb057350 Rovcanin, Adnan, Adisa Omerbegovic, i Muamer Halilbasic. 2005. Faktoring: instrument gasenja nelikvidnosti u BiH. Sarajevo: SEED.
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