Fiduciary Factoring is based upon Agency Law which is a major part of the Common Law which regulates the law of all Commonwealth countries.
The Agency Law allows a third party (usually called "AGENT") to act in his own name for and on behalf of another party (usually called "PRINCIPAL"). The AGENT acts according to the orders received from the PRINCIPAL. The relationship between them is regulated by the Agency Agreement which defines how the AGENT must conduct the business for and on behalf of its PRINCIPAL, and how much he will be paid for doing so.
- The AGENT (English company) receives an order from the PRINCIPAL asking for the French company X, based at 1 Rue de la Place, 75001 Paris, France, to be invoiced for €10,000 according to the commercial agreement dated 01/01/2005 based on clients' introduction. (In this example, the English company "AGENT" communicates and contracts with the final client to justify the invoicing.)
- The English invoice is sent by fax and by post, to ensure rapid payment.
- The final client (The French Company X) pays €10,000 euros into the English bank account of the AGENT. These funds (in the AGENT bank account) belong to the PRINCIPAL.
- The AGENT retains his commission (10 % or 12% according to the selected factoring option).
- The PRINCIPAL orders the AGENT to send the full balance (88% or 90% according to the selected factoring option) onto his Swiss bank account.
- The AGENT makes the payment onto the PRINCIPAL bank account.
It really is this simple!