Factoring is a financial service, where funding, collection and guarantee services are provided to the firms together or separately by assigning current or to arise receivables from sales of goods and services. Factoring is a receivable management and trade financing system.
Having said that; according to the law no 6361 titled Leasing,Factoring and Financing Companies; every factoring transaction should be connected to an invoice or any other document that is a substitute of an invoice.
Invoices or documents substituting invoices that constitute the foundations of factoring transactions are obtained at the application stage for current receivables and are obtained after goods and services are realised for to arise receivables.
Guarantee: Situation where risk of nonpayment of the receivable by the factoring debtor is undertook by the financial institution under certain conditions.
Collection: Keeping receivable accounts and records and following up collections.
Funding: Conversion of commercial receivables into cash without waiting until due date by making prepayment according to the needs of the firms