Factoring is a receivables financing arrangement whereby a company sells its trade receivables to a third-party financial institution (the factor) at a discount, in exchange for immediate liquidity. Unlike the French Dailly assignment, factoring typically involves notification to debtors and transfer of collection responsibility to the factor. It can be recourse (the seller bears the risk of non-payment) or non-recourse (the factor absorbs bad debt risk). In financial due diligence, active factoring programmes significantly distort the reported working capital: factored receivables no longer appear on the balance sheet, causing understated working capital that must be restated to reflect the true operational funding need.

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Example: a French distributor factors CHF 4.2 million of receivables at a 2.5% discount, receiving CHF 4.1 million immediately. These receivables do not appear on the balance sheet at year-end. In the due diligence, restating the working capital to include these factored receivables reveals a true working capital of CHF 6.8 million versus the reported CHF 2.6 million — a CHF 4.2 million difference that directly impacts the completion accounts adjustment.

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Hectelion systematically identifies factoring programmes and restates working capital accordingly in every financial due diligence engagement.