Carry out your commercial transactions without waiting for payments: with our factoring service, we will immediately finance your invoices, ensuring continuous cash flow and financial stability.
Conversion of receivables into cash without waiting for the buyer’s payment.
Financing without collateral based on receivables.
The option to defer payments contributes to increased sales and enhanced appeal to partners.
What is factoring?
Factoring is a short-term trade financing instrument provided by a bank, under which the right to receive payment /monetary claim/ for goods sold or services provided by you is assigned to the bank for a certain fee, as a result of which you receive most of the amount without waiting for the buyer to make the final payment.
When should factoring be used?
You are a seller (exporter) and:
work with a number of regular buyers (importers),
seek to offer more competitive terms by providing deferred payment terms (e.g., up to 90 days of deferred payment) and increase your sales volumes,
have receivables, but periodically face certain financial difficulties and need to obtain cash,
are ready to “sell” your receivables and receive the amounts due in the future in cash for a certain fee.
The Bank provides the following types of factoring:
By the nature of the commercial transaction:
local factoring in AMD and foreign currency, where both the customer and the debtor are a resident legal entity or individual entrepreneur of the Republic of Armenia.
export factoring in AMD and foreign currency, where the customer is a resident legal entity or individual entrepreneur of the Republic of Armenia, while the debtor is a non-resident legal entity or individual entrepreneur.
By the right of recourse:
recourse factoring (with the right of recourse) - factoring under which, if the debtor fails to fulfill or improperly fulfills its payment obligations, the Bank acquires the right of recourse against the customer,
non-recourse factoring (without the right of recourse) - factoring under which the Bank bears the entire risk of the debtor’s failure to fulfill or improper fulfillment of payment obligations, without the right of recourse against the customer.
By the right of recourse
By the right of recourse is local recourse factoring under which the Debtor is not notified of the factoring transaction.
Community Factoring
Financing without the right of recourse against the assignment of a monetary claim against communities is provided to resident legal entities and individual entrepreneurs of the Republic of Armenia that have concluded contracts with communities of the Republic of Armenia for the supply of goods, performance of works, or provision of services. The organization may assign to the Bank monetary claims against more than one community.
| Maximum amount of Local and Export Factoring if not secured by EIA insurance or a guarantee/letter of credit issued by another bank | Maximum amount of Local and Export Factoring if secured by EIA insurance or a guarantee/letter of credit issued by another bank |
|---|---|
|
|
Community factoring is provided without collateral, and the maximum amount of factoring financing is 100% of the invoice amount.
FINANCING AGAINST THE ASSIGNMENT OF A MONETARY CLAIM (FACTORING/CLOSED FACTORING)
Servicing of Local and Export Factoring¹
| Setting the maximum factoring limit for the Customer | 0.15%, minimum: AMD 25,000, maximum: AMD 250,000 |
| Review of the maximum factoring limit | AMD 15,000 |
| Factoring issuance fee | 0.3-1% of the invoice amount, minimum: AMD 5,000 |
| Financing against the assignment of a monetary claim (factoring)² | Annual interest rate:
|
¹ Closed factoring is not provided for export purposes.
² Closed factoring is provided only in AMD.
FINANCING AGAINST THE ASSIGNMENT OF A MONETARY CLAIM AGAINST COMMUNITIES (COMMUNITY FACTORING)
| Community factoring issuance fee | 9% per year (charged quarterly) |
| Financing against the assignment of a monetary claim against communities (Community Factoring) | 0% (provided only in AMD) |
| Maximum factoring limit | Up to 36 months |
| Maximum duration of factoring | Up to 120 days (in certain cases, depending on the Debtor’s rating and market position, the maximum duration may be 180 calendar days) |
| Maximum Community Factoring limit | Up to 72 months |
| Maximum duration of Community Factoring | Up to 60 months |
For more details:
Detailed information on the amount of possible additional payments and all the points presented is available in the Trade Financing Instruments tariffs.
Previous terms of the Trade Financing Tariffs
List of excluded and subject-to-approval activities
Export Insurance Agency of Armenia (EIA)
The Bank sets a maximum factoring financing limit for each Customer based on the Customer’s financial condition, solvency, sales volumes, credit history, and the total value of the contract concluded with the Debtor for the supply of goods, performance of works, or provision of services.
Factors for rejecting the limit include insufficient financial indicators resulting from the analysis, the Customer’s poor credit history, insufficient/lack of required collateral, the professional opinion of the Business Consultant, and the professional opinion of the Credit Committee.
A decision regarding the maximum factoring financing limit is made within 1-20 banking days after the Customer submits the application and the required package of documents.
The Bank communicates its decision to the Customer within 1 banking day.
The limit is provided within 1-5 banking days after the Customer submits the complete package of required documents and the collateral process is completed.
After receiving the documents required for factoring, the Bank checks them within 5 (five) business days and, after confirming that the monetary claim is genuine, makes a decision on providing financing.
Within 1 (one) business day after making a decision to provide financing, the Bank transfers the Financing Amount to the Customer’s bank account.
Factoring is processed at the Bank’s Head Office and branches, except for the Komitas, Yeritasardakan, Teryan, Shinarnarner, Homplex Mall, Gyumri, Ashtarak, and Aragats branches. The complete list of the Bank’s branches is available here.
Changes in the foreign exchange rate may affect factoring repayments if the financing is provided in foreign currency.
For foreign currency factoring, the exchange rate published on the official website of the Central Bank of the Republic of Armenia as of the loan provision date is used as the basis for calculating the Annual Percentage Rate. The Annual Percentage Rate may change depending on changes in the exchange rate published on the official website of the Central Bank of the Republic of Armenia.
The Bank has the right, in the event of fluctuations in the interest rates on funds raised and placed by the Bank in the financial market and/or changes in the financing rate and/or the existence of such prerequisites, to unilaterally change the interest rates and fees stipulated by the Agreement by notifying the Customer and/or Debtor at least 30 calendar days in advance. The changes will apply from the date specified in the notice.
The Customer is liable to the Bank if the monetary claim subject to assignment is not genuine in whole or in part, and in the case of recourse factoring, also in case of failure to fulfill or improper fulfillment of the obligation stipulated by the Agreement.
If factoring is provided against collateral in the form of real estate, a vehicle, agricultural or other machinery, equipment, and the property is appraised at AMD 30 million or more, the property must also be appraised by a qualified independent appraiser cooperating with the Bank.
During the term of the Agreement, the loan account statement and other information required to be provided under the legislation of the Republic of Armenia are provided free of charge. Statements not required to be provided under the legislation of the Republic of Armenia and duplicate statements are provided as follows:
for a period of up to 6 months (inclusive) - free of charge,
for a period of more than 6 months and up to 12 months (inclusive) - AMD 2,000 (including VAT),
for a period exceeding 1 year - AMD 3,000 (including VAT),
Information on the loan may be provided in the form of a statement as required:
within the business day following submission of the application - AMD 5,000; when applying through the acba digital system - AMD 3,000 (including VAT),
on the same business day, within 1 hour - AMD 7,000; when applying through the acba digital system - AMD 5,000 (including VAT),
within one to four business days - through the delivery service - AMD 6,000; when applying through the acba digital system - AMD 4,000 (including VAT).
For factoring secured by property, the Customer may incur the following payments:
Real estate appraisal service fee - AMD 5,000 and more, depending on the area and type of the property,
Notary service fee - AMD 3,000-15,000,
Fee for the registration certificate of the right to pledge real estate - AMD 2,000-25,000,
Fee for a unified statement regarding restrictions on real estate - AMD 10,000,
Fees related to pledging other property: AMD 2,000-10,000.
Depending on various circumstances, the Bank may require additional documents and information. For the purpose of proper customer due diligence as defined by the RA Law “On Combating Money Laundering and Terrorist Financing,” the Bank may, based on the “Know Your Customer” principle, require the Customer to provide additional documents or other information, as well as ask additional questions during verbal communication. If proper identification of the Customer is impossible or account servicing is impossible, access to the service provided by the Bank may be restricted. In addition, in accordance with the agreement signed with the United States under the Foreign Account Tax Compliance Act (FATCA), the Bank may collect additional information to determine whether you are a U.S. taxpayer.
Procedure for Calculating Factoring Interest and the Factoring Issuance Fee
The fee payable to the Bank for factoring is calculated based on the full amount of the monetary claim assigned to the Bank and is charged from the Customer’s or Debtor’s bank account at the time of factoring financing. If factoring is repaid before maturity, the fee payable to the Bank is not subject to recalculation or refund.
The interest payable to the Bank for factoring is calculated based on the outstanding financing amount for the actual duration and is charged from the amount(s) allocated by the Debtor toward fulfillment of the monetary obligation.
Representative Example of Interest Calculation
Assigned factoring amount - AMD 10,000,000
Factoring financing amount - 90% of the assigned amount
Factoring financing amount - AMD 9,000,000
Annual factoring interest rate - 14%
Factoring issuance fee - 0.5%
Factoring term - 120 days
The daily interest rate will be:
9,000,000 × 14% / 365 = AMD 3,452
The interest calculated for the entire term will be:
3,452 × 120 = AMD 414,247
The one-time factoring issuance fee will be:
10,000,000 × 1% = AMD 100,000
Civil Code of the Republic of Armenia, Article 895.
The Customer is liable to the financial agent for the validity of the monetary claim subject to assignment, unless otherwise provided by the financing agreement against the assignment of the monetary claim.
The monetary claim subject to assignment is considered genuine if the Customer has the right to transfer the monetary claim and, at the time of assignment of the claim, is not aware of any circumstances by virtue of which the Debtor has the right not to fulfill the claim.
The Customer is not liable for the Debtor’s failure to fulfill or improper fulfillment of the claim subject to assignment when the financial agent presents the claim for fulfillment, unless otherwise provided by the agreement concluded between the Customer and the financial agent.
Civil Code of the Republic of Armenia, Article 899.
If, under the terms of the financing agreement against the assignment of a monetary claim, the financial agent finances the Customer by purchasing the claim from the Customer, the financial agent acquires the right to the entire amount it is to receive from the Debtor for fulfilling the claim, while the Customer is not liable to the financial agent for the fact that the amount received by the latter was less than the price at which the agent acquired the claim.
If the monetary claim was assigned to the financial agent to secure the fulfillment of the Customer’s obligation toward the financial agent, and unless otherwise provided by the financing agreement against the assignment of the claim, the financial agent is obliged to provide the Customer with a report and transfer to the Customer the portion exceeding the amount of the debt secured by the assignment of the Customer’s claim. If the funds received by the financial agent from the Debtor are less than the amount of the debt owed by the Customer to the financial agent and secured by the assignment of the claim, the Customer remains liable to the financial agent for the outstanding balance of the debt.
Civil Code of the Republic of Armenia, Article 901.
If the Customer breaches its obligations under the agreement concluded with the Debtor, the Debtor has no right to demand from the financial agent the return of amounts already paid under the transferred claim if the Debtor has the right to receive such amounts directly from the Customer.
A Debtor that has the right to demand directly from the Customer the amounts paid to the financial agent as a result of the assignment of the claim nevertheless has the right to demand those amounts from the financial agent if it proves that the latter did not pay the Customer for the assignment of the claim or made the payment knowing about the Customer’s breach of an obligation toward the Debtor to which the payment related to the assignment of the claim refers.
YOU HAVE THE RIGHT TO COMMUNICATE WITH THE FINANCIAL ORGANIZATION IN YOUR PREFERRED WAY, BY POSTAL OR ELECTRONIC MEANS. RECEIVING INFORMATION ELECTRONICALLY IS THE MOST CONVENIENT. IT IS AVAILABLE 24/7, FREE FROM THE RISKS OF LOSING PAPER INFORMATION AND ENSURES CONFIDENTIALITY.
THE AMOUNT OF PENALTIES AND CASES OF APPLICATION IN THE EVENT THAT THE CONSUMER FAILS TO FULFILL THEIR OBLIGATIONS ON TIME:
IF THE DEBTOR FAILS TO MAKE PAYMENTS WITHIN THE TERMS AND AMOUNTS SPECIFIED BY THE FACTORING AGREEMENT AND/OR APPLICATION-AGREEMENTS, THE BANK HAS THE RIGHT TO CHARGE A PENALTY ON THE UNFULFILLED MONETARY OBLIGATIONS, WHICH MAY NOT EXCEED 0.13% FOR EACH OVERDUE DAY.
IN THE EVENT OF FAILURE TO FULFILL OR IMPROPER FULFILLMENT BY THE CUSTOMER OR DEBTOR OF THE PAYMENT OBLIGATIONS ESTABLISHED BY THE FACTORING AGREEMENT, THE BANK HAS THE RIGHT TO CHARGE A PENALTY ON THE UNFULFILLED MONETARY OBLIGATIONS, WHICH THE BANK SETS UNILATERALLY AND WHICH MAY NOT EXCEED 0.13% FOR EACH OVERDUE DAY.
PAYMENT PRIORITY:
WHEN PAYMENTS ARE MADE ON OR AFTER THE DEADLINE FOR FULFILLMENT OF OBLIGATIONS, the penalty calculated on the loan amount, interest and/or commission is paid first, followed by overdue interest, overdue commission, overdue loan amount, and then interest, commission, and loan amount. Payments made before the deadline for fulfillment of obligations are directed toward reducing the loan amount, unless there is a scheduled repayment instruction or an overdue obligation under the Agreement (in the specified cases, payments are made in the order described above).
FORECLOSURE OF COLLATERAL:
PLEDGED PROPERTY MAY BE FORECLOSED IF THE CUSTOMER/DEBTOR FAILS TO FULFILL THE OBLIGATIONS UNDERTAKEN UNDER THE AGREEMENT ON TIME. IF THE VALUE OF THE COLLATERAL IS INSUFFICIENT, THE CUSTOMER’S/DEBTOR’S OBLIGATIONS WILL BE REPAID FROM THE CUSTOMER’S/DEBTOR’S OTHER PROPERTY.
IN THE CASE OF RECOURSE FACTORING PROVIDED BY THE BANK, WHEN THE CUSTOMER BEARS THE RISK OF THE DEBTOR’S NON-PAYMENT AGAINST THE ASSIGNED MONETARY CLAIM, THE FACTORING SECURITY REQUIREMENT IS PRESENTED TO THE CUSTOMER AND, IF NECESSARY, ALSO TO THE DEBTOR.
IN THE CASE OF NON-RECOURSE FACTORING PROVIDED BY THE BANK, WHEN THE CUSTOMER DOES NOT BEAR THE RISK OF THE DEBTOR’S NON-PAYMENT AGAINST THE ASSIGNED MONETARY CLAIM, THE FACTORING SECURITY REQUIREMENT IS PRESENTED TO THE DEBTOR.
INFORMATION PROVIDED TO THE CREDIT REGISTRY:
ATTENTION: IF YOU FAIL TO FULFILL OR IMPROPERLY FULFILL YOUR OBLIGATION, THE BANK WILL SEND THE DATA TO A CREDIT BUREAU, WHERE YOUR CREDIT HISTORY WILL BE FORMED. YOU HAVE THE RIGHT TO OBTAIN YOUR CREDIT HISTORY FROM THE CREDIT BUREAU FREE OF CHARGE ONCE A YEAR.
ATTENTION: A POOR CREDIT HISTORY MAY PREVENT YOU FROM OBTAINING A LOAN, FACTORING, OR ANY OTHER PRODUCT FINANCED BY THE BANK IN THE FUTURE.
1. How does factoring differ from a loan?
A loan is provided for a specific fixed term, whereas factoring is provided for the actual period of deferred payment,
loan funds are repaid by the borrower, whereas the factoring amount is repaid from the amount paid by the debtor,
in the case of a loan, collateral is generally required, whereas the receivable is the security for factoring,
unlike borrowed funds, factoring financing is not reflected on the balance sheet as borrowed funds,
in lending, the borrower’s solvency is taken as the basis, whereas in factoring financing, the solvency of the buyers is taken as the basis,
loan funds are provided in one or two stages, all at once, whereas factoring financing is provided as needed,
lending does not involve the provision of other services, whereas factoring is not only financing but a set of additional services.
2. Who is recourse factoring intended for?
Recourse factoring is intended for those who trust their buyers and therefore do not need to pay more (recourse factoring is less expensive),
3. Will buyers be discouraged by the fact that the seller has started using factoring?
Reliable buyers who comply with payment terms can only have a positive attitude toward factoring. It should also be noted that, thanks to factoring, the seller can often offer the buyer a longer payment deferral. Factoring is beneficial not only for the seller but also for the buyer, because through factoring the buyer receives trade credit, continuously maintains a wide range of products, and temporarily has additional free cash.
4. Can factoring be used in the services sector?
Certainly, factoring can also be fully applied when services are provided under deferred payment terms.
5. What happens if the debtor fails to pay for the goods supplied to them when the transaction has been financed through factoring?
If the buyer fails to make the payment, there are two possible options, depending primarily on the type of factoring (recourse or non-recourse). In the case of recourse factoring, the seller is obliged to pay, on behalf of the buyer, the amount not paid by the latter to the Bank, whereas in the case of non-recourse factoring, the Bank must independently resolve the issue of recovering the overdue obligation, bearing all risks.
6. Will the Bank provide factoring financing against an overdue receivable?
The Bank provides factoring financing exclusively against non-overdue receivables.
7. What is the advantage of factoring over a loan?
In fact, this is not so much about an advantage as about the fact that they meet different customer needs. Factoring is primarily a tool that ensures an increase in sales volumes without the risk of increasing overdue receivables from buyers.
