III. FACTORING MARKET AND FEATURES
According to the Factors Chain International (FCI), in 2006 the total factoring volume reached $11.342 trillion USD worldwide. The growth rate compared to the volume in 2005 is around 12% [5]. Factoring has advantages over other type of lending for firms in developing economies [6]. The number of small to medium business, especially medical, construction material, and construction venders, has increased recently because of the use of factoring [7]. In Taiwan, studies on factoring have been done in many industries other than the construction industry. The features of the construction industry are different, and the use of factoring in the industry is in its beginning stages [8]. However the use of factoring so far still highly concentrated in a few countries and industries [3] is expanding in many
parts of the world including the Asian region.
There are two types of factoring in common use: recourse and non-recourse. Factoring with recourse entitles he factoring institution to make payment claims to the supplier if the account payment defaults. In non-recourse actoring, the factoring institution has no claim which reduces and transfers the supplier’s credit risk [9]. Determinants for choosing factoring as a source of finance for working capital and a tool for cash flow improvement have been discussed by other researchers [10]. Merx pointed out that one reason that factoring is popular is because cash can be collected in a day or two through selling receivables much faster than the general 30 to 60 day collection period. It is also more flexible in terms of cash conversion cycle [11]. When profit margins, interest rates, credit protection, and timeliness need to be considered, factoring helps to reduce international trade risk[12].
IV.FACTORING COSTS AND EMPIRICAL CASE STUDY
A. Contractor Costs Using Factoring
Basically factoring is a package of services involving three parties - supplier, buyer, and factor (Figure 1). For construction projects, the supplier means the contractor, who uses factoring to improve his/her cash-flow, while the buyer
indicates the owner. During the factoring process, credit approval is first issued and, under a factoring relationship, a discounted advance payment of the invoice amount is granted to the contractor. A typical advance rate may vary from 70% to 90%, with a reserve in a range of 30% to 10%. When the invoice from the owner is paid in full, the contractor can receive the reverse amount less a commission fee which usually varies from 1% to 5% [8]. Based on the mechanic
(Figure 1) and disbursement concepts described in the previous section, the contractor’s costs for using factoring can be derived, beginning with the factor’s commission fee. The range of the commission fee varies and how it is etermined is usually confidential.
The variables affecting commission fees include the total amount, length of contract period, contractor’s credit, and owner’s credit [13]. The 本文来自辣.文-论-文-网原文请找腾讯3249.114 , that is, the contractor and the owner. Generally the commission fee function ( ) i f x for the ith period of time is expressed as where is the total number of progress payments; pi is the progress payment amount for the ith period; r is the percentage of Contractor (Customer)Factor.