Every answer and its explanation appears here once you have finished the path. Each one then links to the matching glossary entry, where the concept is set out in full with its worked example.
1. Three things hide behind a trade receivable. How do they divide between credit insurance and factoring?
Credit insurance takes the risk, leaves recovery and finances nothing; factoring takes recovery, finances, and takes the risk only in certain forms
The recurring error is believing that a product taking one of these functions takes them all, and it is paid for at claim time rather than at signature. It also explains a distorted comparison: an exporter comparing factoring to a policy on total cost alone compares a service to a guarantee, and will find factoring expensive without seeing that it buys a service nobody else provides. The answer leaving recovery to the insurer is especially costly, since the policy on the contrary requires diligence from the insured before paying. The price of factoring is in fact read on those three lines, administration, financing, and risk-taking where the contract is without recourse.
Glossary entry →2. Worked case: March 8 installment unpaid, forty-five-day notification deadline, the factor's monthly statement sent to the assignor on May 10. Who is at fault?
Nobody in the ordinary sense: each followed its own process and it is the assembly of the two that is wrong, the deadline expiring April 22 when the information reaches the assignor, the only party able to notify, on May 10
The insurer's refusal is well founded and not arguable: eighteen days late on a perfectly valid receivable. The answer blaming the factor faults it for not doing what nothing obliged it to do, since it is only a beneficiary and not the insured, and that is precisely the missing clause. The one blaming the assignor asks a party that no longer sees the payments to monitor them anyway, which is the opposite of what it bought. The one blaming the insurer wants a policy deadline to adapt to a private process it knows nothing about. Two clauses would have sufficed, written at structuring: direct notification by the factor with an internal deadline shorter than the policy's, and a right of review for the assignor over recovery decisions.
Glossary entry →3. The cover falls away for late notification on the 1.2 million. Where does the loss end up?
With the exporter: the factor turns back on the assignor under the assignment's recourse warranty, so it has paid for a policy, for a factoring commission, and is covered by nothing
This is the conclusion that makes the structure dangerous: the two products bought do not relay each other, they cancel each other out, and the exporter is left alone with the loss after paying for both. The answer leaving the loss with the factor assumes factoring without recourse, which is not the structure described and is checked in the contract rather than in the product's name. The one setting aside the insurer's refusal for want of harm imports the regime of breaches that can be quantified, like an extension granted without consent; late notification belongs to the other family, the one that strips the insurer of powers and is sanctioned without proration.
Glossary entry →4. The factor chases, decides on litigation, grants or refuses an extension. How does that expose the insured?
The policy requires diligence the insured no longer controls, and both a slack recovery and a premature writ are held against it although it decided neither; what protects is a written right of review above a threshold
The interests diverge without anyone acting in bad faith: the factor handles thousands of files with standard procedures and an internal deadline, the insured has a commercial relationship to preserve and a claim file to document. The answer keeping only insufficient recovery sees half the problem, when a premature writ can ruin a negotiation and manufacture the very commercial grievance one was trying to avoid. The one protecting the insured by mere notification confuses informing with transferring, exactly like the designated beneficiary clause in the module on the movement of receivables: notifying moves no obligation.
Glossary entry →5. The exporter expects derecognition from its factoring. What decides it, and why is it often discovered at year end?
The effective transfer of risk: with recourse, or with even limited residual recourse, the advance received is financing on the liabilities side, and a recourse warranty clause or a holdback is enough to keep the risk
Exporters regularly discover at year end that the chosen structure does not produce the expected effect, because they read a title instead of reading clauses. The answer relying on the product's name is exactly that error put into words. The one having the assigned policy carry the transfer is subtler and more tempting, since insurance does move economic risk; it does not move it to the factor, and a recourse warranty brings the risk back to the assignor anyway. The question goes to the auditors before signature, not after, and it often decides the structure rather than its cost.
Glossary entry →