Guide to raise funds





What is it?

It is a financial instrument that avoids administrative work of generating payments to suppliers, offering them the possibility to advance the collection of their invoices with advantages.

This financial instrument was created to eliminate the uncertainty of the seller and facilitate the work of the buyer. This instrument is an agreement between the undertaking party (the buyer) and a specialized organization, who will be in charge of managing and guaranteeing, where appropriate, payment to the suppliers.

There are diverse methods of confirming:

1. Management of Payments: it exists in all confirming contracts, since it is the bill that features this type of operation. This is a service of management, by which the bank proceeds the payment of the transferred credits, charged to the account of the client opened in the financial organization specified in the contract.

2. Financing to the suppliers: once the contract is signed with the client the Bank contacts the suppliers of the same to offer them advance payment of the transferred invoices. If the suppliers accept the proposal, then the financial organization supplies them with a financing (the terms of which are agreed with the client).

Financing to the client of confirming (buyer)

In agreement with the contract, the operation is very simple since the undertaking party only has to generate a payment proposal with the invoices of confirming, with expiration on 15th of each month, for example, indicating the amount, name of the supplier, address, fax number and number of the bank account if payment is to be made through bank transfer.

If financing is needed, all or part of the amount to be paid during the period can be delayed, up to the limit established in the confirming contract, with the interest cost previously agreed.

If there are cash surpluses, the party can choose to advance the payment with a discount, calculated on the base of the interest rate also stipulated for these operations in the contract.

Financing to the supplier (seller)

When the confirming company duly receives the authorized invoices of its client, it proceeds to contact the creditors to notify them of the payment that, in principle, will be payable at expiry. If the supplier wants to advance collection, a fax is sent offering the possibility of advancing payment to within 48 hours following receipt of the payment proposal. Some financial organizations already carry out this operation automatically.

For the debtors, this possibility has the advantage that financing is offered regardless of their solvency, since it is based on that of the buyer.

Use of confirming Confirming can be used to manage payments to suppliers, whether national or international, as well as to finance these payments, whenever they are short term, with rotating character and for the purchase of generally nonperishable products.

Advantages and disadvantages.

Advantages for the client (buyer)

The buyer is liberated from the administrative tasks of managing payments to the suppliers, concentrating all the payments in a few transactions per year.

It allows him/her to negotiate with the suppliers with advantage, since it assures them collection and facilitates financing. This should allow him/her to obtain compensations in prices, discounts, terms of payment.

Generally, there is a discount by the company for the transfer of financing business. (in some cases it improves 50% of the differential on the MIBOR that the financial organization applies to the invoices that it receives).

Obtention of additional financial income, if a division of interests and/or commissions between the client and the financial organization has been agreed.

Advantages for the supplier (seller)

For the supplier, management of collection from the clients is simplified, since there is no need to take care of the procedures, it eliminates insolvency risk in case the confirming is without resources, it eliminates collection costs (stamp duty, commissions, mail etc, ..) and opens the possibility of a financing outside his/her actual capacity of debt.

In addition, it facilitates financing of up to 100% of the debt without affecting the global credit position of the company, increasing the cash flow of the company, since it transforms debts into money, and allows the buyer to grant his/her client better sale conditions.

Disadvantages for the client (buyer)

The buyer/ client needs to have a considerable volume of purchases, distributed regularly in time and notably diversified as far as suppliers go.

The cost is relatively high, though not so much so when we take into account the savings in administration costs that it supposes.

It forces the centralization of a lot of business in a single organization, something which, even though it has advantageous compensations, limits the possibilities of negotiation with other financial organizations.

It means assumption of all commitments derived from purchases once the order of


has been issued. Disadvantages With respect to the supplier (seller), financing by means of this operation of confirming can be expensive in comparison with other forms of financing, especially when the risk of insolvency of the client is low. The use of this instrument does not depend on the seller, but on the client.

The advance payment is not available until the client has given his conformity to the confirming organization (as opposed to factoring, which is available as soon as the invoice has been issued).

Barcelona Activa SAU SPM will ensure that this information and the data contained in the reports are accurate and faithful. These reports are published to provide general information. Barcelona Activa SAU SPM will not accept under any circumstance any responsibility for losses, damages or theft, or for any other business decisions based on data or pieces of information that can be extracted from this report.

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