Factoring and Forfeiting in Slovakia and Possibilities of its Application in Wood-Working Industry

Factoring is the contract negotiated continuous purchase of short-term debts, incurred by supplier due to the provision of unsecured credit supply. Factoring is a method of financing that can offer a lot to businesses, especially with its added value. This method mainly includes protection before customers’ insolvency, management of receivables, as well as the opportunity to dispose with the funds before the end of the maturity of receivables. Forfeiting is the purchase of export receivables on credit at the time of delivery. It is related to receivables with the future maturity denominated in freely convertible currency, and secured with a bank aval bill, letter of credit with deferred payment or a bank guarantee. The conditions, under which each company provides forfeiting, depend essentially on the creditworthiness of the applicant and customer, as well as creditworthiness of the bank that issued the payment instrument. The aim of the present paper is to analyze the factoring and forfeiting market in Slovakia and based on the analysis of this issue to propose and verify theoretical and practical possibilities of factoring and forfeiting financing in the selected wood-working company with the estimation of costs associated with their use.