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WORLDPAY EDITORIAL TEAM
July 21, 2019
It can take a while to receive your funds in Brazil. Ensuring cash flow is critical to ensuring your business runs smoothly. Factoring is widely used in Brazil and allows you to receive settlements sooner. Receive funds the same day, or the next day - no more waiting months to be fully settled.
The Wikipedia definition: ‘Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount.’
The simple definition: Factoring results in advance settlement funding. In other words, you can receive the money you are owed in the future, in the present. The financial institution offering this service will collect the payment from the party who owes you when the accounts are due. This is a particularly useful service in markets where installment payment plans are common.
In Brazil, settlement times are a lot longer than the global average. For example, if a consumer makes a purchase with a credit card1, it takes 30 days for you to receive payment for the good or service you have sold. Moreover, it is common for consumers to pay in installments2. Consumers can choose a maximum of 12 installments, payable each month in equal amounts. This means you could wait up to a maximum of 360 days before receiving the final payment.
With factoring or advance settlement, you can request to settle earlier - normally the same day or next day, for a fee.
Financial institutions charge a fee for this service. It is based on:
The financial institution will charge fees per invoice, per week or per month. Fees across providers range from 1-2% to up to 18%, depending on the number of installments to be paid upfront.
You will hear factoring referred to in a number of different ways, but they all operate in the same way
*Factoring is not considered borrowing as it involves selling the account receivables. Therefore, factoring is not the same as invoice discounting (assignment of accounts receivable in America) which refers to borrowing using account receivable assets as collateral for a loan.
Factoring is a cash flow management strategy to turn unpaid invoices into working capital. It helps financial managers balance the money received from offering goods and services with money owed to employees, suppliers, the government, etc.
Here are some examples of when advance settlement may be recommended:
Worldpay ensures factoring is a competitively priced option for your company, and will not charge anything other than the factoring fee agreed (i.e. no additional IOF tax fees not included in overall factoring fee).
Worldpay’s factoring offer goes above and beyond the industry standard
Circle with 1-2 days from purchase with process flow around
Purchase + Factoring Request -> Worldpay** - > Acquiring Platform -> Customer's Bank -> Worldpay Sponsor Bank - > Merchant
**Worldpay will receive the full settlement 30 days later
 Credit cards are the most preferred online payment method, making up 60% of eCommerce payment value
 Instalments consist of paying for a product over a specified period of time in equal payments. In Brazil consumers can choose between 2-12 instalments, paid each month. Up to 80% of online transactions are paid in installments in the travel industry
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