Glossary · Austria and Germany
Factoring and collection
Factoring involves purchasing receivables under an agreed model; collection organises their recovery. Both may involve assignment and data processing, but they serve different economic purposes.
Distinguish the concepts
In factoring, the purchase price may provide liquidity before the customer pays. Risk transfer, eligible claims, fees and recourse depend on the agreement. Collection after a payment delay is not automatically advance financing. A collection assignment alone does not mean the receivable was economically sold or the client has already been paid.
Jurisdiction and scope
Germany’s Banking Act defines factoring as ongoing purchase of claims under framework agreements, with or without recourse. That definition should not be equated with every isolated claim purchase. Regulatory and contractual requirements depend on country and model. incaseof.law’s terms describe a collection instruction; this explanation does not imply a factoring offer.
Illustrative business example
One business needs predictable liquidity for future invoices; another wants help with an individual overdue, undisputed claim. Financing and purchase terms matter for the first need; recovery route, costs and evidence matter for the second. Compare the intended purpose rather than relying only on the label “receivables management”.
Common questions
Does assignment automatically mean factoring?
No. Assignment can serve different purposes, including recovery or financing.
Does factoring always transfer default risk?
No general assumption is safe. Assess recourse, exclusions, objections and agreed risk allocation in the specific contract.
Does incaseof.law advance the invoice amount immediately?
No such advance follows from the collection instruction. Payout depends on actual receipts and contractual settlement.
Related topics
Sources and basis
- Deutschland / Germany: KWG 1, Factoring
- ABGB 1392
- BGB 398
- Engagement, services, remuneration and cooperation: incaseof.law terms
Content reviewed on 23 September 2026. Procedural information and our contractual terms are separate foundations. The individual case remains decisive.
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