Factoring is a financing technique that enables an exporter to collect the purchase price of the goods relating to an export transaction prior to the due date of payment. Typically, banks in Qatar act as factors and purchase receivables relating to the export transaction. The same technique is also used for financing contractors and sub-contractors, where works have been performed or goods and services have been supplied and payment under the corresponding invoice is payable after a period of time (e.g. 90 days). This latter technique is referred to as ‘invoice discounting'.

Balance Sheet Treatment

One key commercial consideration for companies seeking to sell their receivables is for the receivables to be removed from their balance sheet as a debt and to appear as revenue that has been collected. This treatment is possible if the receivables are sold on a ‘without recourse' basis. Auditors usually require a legal opinion to confirm that a ‘true sale' of the receivables has been effected.