Commercial Bank of Dubai (CBD) announced today that it had signed a partnership agreement with Coface Emirates Services Limited to provide Factoring Services to its corporate and commercial customers. Factoring is a financial transaction whereby a business sells its accounts receivable (invoices) to a third party (called a factor, in this case CBD) at a discount. The factor provides financing to the seller of the accounts in the form of a cash advance that is often 70-85% of the purchase price of the accounts.
Faisal Galadari, GM, Business Group of Commercial Bank of Dubai and David Venediger, Managing Director of Coface Emirates Services Limited, signed the Partnership Agreement that launched CBD Factoring Services.
Under the terms of the agreement Coface Emirates Services will provide back office Factoring Services to CBD thereby enabling the bank to offer both non-recourse and with recourse full factoring to its clients.
As he signed the agreement, Faisal Galadari said: “We are pleased to launch CBD Factoring Services in partnership with Coface Emirates Services. This will enable us to provide best in class asset based receivable financing services to our corporate and commercial clients. Debtor monitoring will be entrusted to Coface Emirates Services.”
According to David Venediger, “We at Coface are excited to partner with Commercial Bank of Dubai. Our Factoring Services model provides an innovative partnership to connect established banks with Coface’s back-office expertise in factoring. We will leverage our factoring experience in countries such as the USA, China, Australia, the UK, Italy, Germany, Denmark and Spain, among others. Our Factoring Services Partnership business model has also proved successful with Coface West Africa that was launched recently.”
Factoring differs from a bank loan in several ways. The emphasis is on the value of the receivables (essentially a financial asset), whereas a bank focuses more on the value of the borrower’s total assets. Secondly, factoring is not a loan – it is the purchase of a financial asset (the receivable).
