Factoring provides an integrated financial package including working capital finance, protection against credit risk, and accounts receivable management and collection. Factoring takes place through an agreement between the factoring company and the seller. Under this agreement, the factoring company purchases accounts receivable from the sale of
products or services produced or performed by the company and convert them into cash. This includes everything that enables companies to provide the necessary funding for the purchase of raw materials and payment of wages, as well as referral management functions and collection of accounts receivable from factoring companies. It should be noted that it might be the company's right of recourse to the seller in the case of non-collection or agreement not to go back to the seller which is the most common in the area of factoring.

The benefits of factoring:
• Provides many advantages, the most important are as follows:
• Enables the seller and the buyer to deal through the account opened in the area of export and import without having to open letters of credit from banks.
• Speeds the circulation of the working capital through the regular flow of capital and improves leverage, leading to the availability of the best financing structure for the company.

• Provides the present value of securities in cash to finance production cycles continuously.
• Provides a liquidity ratio of up to 90% of the value of the seller’s financial rights.
• Ensures management service of financial matters so as to lighten the administrative burdens on the company and upgrading main business carried out by the company.
Procedures to activate the activity of factoring:

A - The first factoring company in Egypt, 'Factors Egypt' was established consisting of the Commercial International Bank, FIM Bank Malta and the International Finance Corporation (the only company registered in factoring records of the Authority for the practice of factoring and working under the free zones system), as well as two companies under development.

B - Amendment of Article (1),Law (8) of the Executive Statute for the Law of Investment Guarantees and Incentives No. 8 of 1997, to add factoring activity to the areas of investment and the granting of the Governing Council of the General Authority for Investment and Free Zones the competence to issue factoring activity practicing rules.

C – The issuance of rules governing the activity of factoring companies by the Board of Directors of the General Authority for Investment and Free Zones which is the administrative body in charge of organizing the activity and these rules include the following:
- Controls and conditions of factoring activity.
- Controls and conditions for registration in the register for the practice of factoring activity.
- Monitoring the work of factoring companies.

D - Cooperation with Egypt Financial Services Project funded by the USAID for the development of factoring activity utilizing international experts in this area to include:
- Modified controls to allow streamlining the procedures of companies’ registration and factoring contracts.
- Increasing the capabilities of employees of the Authority for the registration of companies and factoring contracts
- Organizing workshops and distribution of publications to raise awareness of factoring.

E - Work on the study of the difficulties and problems faced by factoring activity in light of the rules of activity in coordination with the factoring company and a number of companies seeking to engage in this activity in Egypt. This is through the formation of a working group of the General Authority for Investment that is to study the difficulties faced by factoring and propose the necessary controls to be exercised.