Factoring: problems and applications in Turkey

Abstract

This study attempts to find out the problems of factoring in Turkey and come up with possible solutions. Factoring is introduced briefly by stating its functions, history and development in the world and Turkey. In addition, factoring is compared with Letter of Credit, Open Account, Cash Against Documents, Credit Insurance, Discount on Draft and Conveyance Credit. Moreover the problems of factoring in Turkey are stated and possible solutions are suggested. In this study it is found that factoring has superiority over other alternatives which Turkish firms prefer to use in their sales transactions. The study has also revealed that factoring is not regulated completely by the separate laws in Turkey. Finally, it is concluded that factoring is a financing technique that helps a lot in the development of trade of Turkey both in domestic and foreign markets. Expansion of factoring is inevitable which is fundamentally a good thing for the Turkish economy and for the factoring industry. Government and factoring firms should do everything to encourage that growth. Public acceptance of factoring is due to professional approach of factors.