What is factoring and how it can help your SME

What is factoring?

Factoring is a financial operation in which your company sells its term invoices to a financial institution (the "factor") and receives the amount in advance: typically between 70% and 90% of the invoice value. When your customer pays the invoice at maturity, the factor keeps its fee and returns the remainder.

How does factoring work in Portugal?

1. The SME issues invoices to its customers with payment terms (30-120 days)
2. It submits the invoices to the bank or factoring platform
3. The bank assesses the risk: quality of the debtor, payment history, financial health of the SME
4. It receives the advance (typically 80-90% of the value) in 1 to 2 business days after approval
5. The customer pays at maturity and the bank is paid directly
6. The bank releases the remainder less the agreed fee

Types of factoring

Recourse factoring

If the debtor does not pay, responsibility reverts to the SME. It is the most common type in Portugal and carries lower rates because the bank takes on less risk.

Non-recourse factoring

The bank assumes the risk of the debtor defaulting. Higher rates, but the SME fully transfers the collection risk.

Confidential factoring

The debtor is not told that the invoice has been assigned, and the SME keeps managing the collection directly. Some banks offer it; on Advanta the debtor is always notified, because the notice is what protects the funder.

How much does factoring cost?

Costs vary according to the risk, the term, and the amount. In Portugal, typical rates are:

• Service fee: 0.5% to 2% of the invoice value
• Financing rate: 2% to 6% annualised (depends on the term)
• No fixed monthly costs on most digital platforms

For a €10,000 invoice at 60 days with a rate of 3.5%, the cost would be approximately €57. Compare it with the cost of an overdraft in our calculator.

Who can use factoring?

Any Portuguese company that issues term invoices to other companies (B2B). The typical requirements are:

• A company with an active tax number and regular commercial activity
• Invoices issued to business customers (not private individuals)
• Payment terms between 30 and 120 days
• No history of serious default

Factoring vs. other forms of financing

Factoring is not a loan: it is simply the advancing of money that is already owed to you. In most cases it requires no personal guarantees. With a non-recourse offer, the invoices can come off the balance sheet without adding debt; with recourse, they usually stay on it.

Compared with:

• Bank overdraft: more expensive, requires guarantees, limits credit capacity. See detailed comparison →
• Bills discounting: heavy bureaucracy, requires sureties, slow process
• Bank loan: creates debt, requires a business plan, takes weeks

How Advanta simplifies factoring

Advanta is a digital platform built to connect your SME with banks and funders for factoring operations. The process is simple:

1. Connect your accounting software (34 direct connections, from TOConline and Holded to SAP and Business Central) or upload your invoices as a file: CSV or Excel, SAF-T, e-invoices (Facturae, UBL/Peppol, CII/Factur-X, FatturaPA and more) and accounting files (FEC, DATEV, XAF). See every connection and format
2. Advanta reads the invoices and prepares the file
3. Advanta checks the file and prepares a risk analysis for the funders
4. Submit the invoices you want to advance
5. A bank or funder decides and makes an offer; once you accept, the money arrives in 1 to 2 business days

No paperwork, no meetings.