Factoring fundamentals
What factoring is, the difference between recourse and non-recourse arrangements, and how fees are typically structured.
Informational resource, not a broker
Understanding factoring, invoice financing, and business liquidity.
AFG Allgemeine Factoringgesellschaft mbH publishes plain-language explanations of how factoring and invoice financing work, so business owners in Stuttgart and beyond can make informed decisions about their working capital.
All content on this site is provided for informational purposes only. AFG Allgemeine Factoringgesellschaft mbH does not sell, broker, or offer any paid services through this website.
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Core topics covered: factoring, invoicing, liquidity
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Published in English for international readers
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Based in Stuttgart, Germany
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Paid products offered on this site
The concept
How factoring is generally structured
Factoring lets a company convert unpaid invoices into available cash before the customer's payment term is due. The explanation below reflects a typical arrangement; specific terms always vary by provider and contract.
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Invoice is issued
A business delivers goods or services and issues an invoice to its customer with agreed payment terms.
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Invoice is assigned
The outstanding invoice is assigned to a factoring company as collateral or through a sale of the receivable.
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Advance is reviewed
The factoring company reviews the invoice and the debtor's creditworthiness before releasing an advance.
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Balance is settled
Once the customer pays the invoice in full, the remaining balance is settled, minus agreed fees.
Topics we cover
Liquidity solutions explained in plain terms
Our editorial content focuses on three related areas of business finance.
Invoice financing
How invoice discounting differs from full-service factoring, and what documentation is generally involved.
Business liquidity
General approaches companies use to manage cash flow gaps caused by slow-paying customers or seasonal demand.
Credit risk basics
Why debtor creditworthiness matters in factoring arrangements and how it is commonly assessed.
Contracts and terms
Common clauses found in factoring agreements, including notice periods, fee caps, and termination rights.
Frequently asked questions
Answers to the questions we hear most often from small and mid-sized business owners exploring this topic.
Why it matters
Cash flow gaps affect even profitable businesses
A company can be profitable on paper and still struggle to pay suppliers or wages if customers take 30, 60, or 90 days to settle invoices. Understanding the available liquidity tools helps owners plan ahead rather than react under pressure.
- Clear, jargon-free explanations of factoring terminology
- Neutral overviews that compare different financing approaches
- Practical context for reading a factoring agreement
- Guidance on questions to ask before signing any contract
From business owners
What readers tell us
Illustrative feedback shared by readers of our informational content. Names have been shortened for privacy.
"The breakdown of recourse versus non-recourse factoring finally made the difference click for me before I spoke with any provider."
M. ReinhardtOwner, logistics services, Baden-Württemberg
"Straightforward, no sales pressure. Just an explanation of how the process usually works and what to watch for."
S. BrandtFounder, manufacturing supplier
"Helped our finance team prepare better questions ahead of comparing factoring offers with our own bank."
J. WellerFinance lead, wholesale distribution
Common questions
Frequently asked questions
Does AFG Allgemeine Factoringgesellschaft mbH sell factoring services through this website?
No. This website exists to provide general information about factoring, invoice financing, and liquidity concepts. It does not offer, broker, or sell any paid product or service.
Is the information on this site financial advice?
No. The content is educational and general in nature. It is not a substitute for advice from a qualified financial, legal, or tax professional familiar with your specific situation.
What is the difference between factoring and invoice financing?
Factoring typically involves selling or assigning invoices to a third party who may also manage collections, while invoice financing (or discounting) usually keeps collections in-house and uses invoices mainly as collateral for an advance.
Who is this information intended for?
Primarily small and mid-sized business owners, finance staff, and students who want a clear overview of how these liquidity tools are commonly structured in practice.
Can I contact AFG with questions about the content?
Yes. You can reach us using the contact form or the details on our contact page. We aim to respond during regular business hours.
Have a question about factoring terminology?
Send us a message and we will point you to the relevant explanation on this site or answer directly where we can.