Factoring vs. deferral: what actually differs

Both products exist for the same reason: the exporter needs money earlier than the buyer is willing to pay. The difference is who the financier transacts with. In factoring, the financier buys the receivable. In deferral, the financier pays the exporter at shipment and collects from the buyer on the agreed term.

In recourse factoring, the risk stays with the exporter: if the buyer doesn't pay, the exporter refunds the factor. In emerging markets this is the default, and for the seller it means minimal protection. In non-recourse factoring — the kind Dash offers — the factor takes the buyer risk: if the buyer defaults, the loss is on Dash, not the exporter.

Factoring usually requires a formal assignment of rights, notice to the buyer and a separate legal relationship with the factor. Deferral is simpler: the exporter ships, uploads the shipping document, gets paid. The buyer doesn't change banks, doesn't sign new papers, and pays on time.

Factoring wins when the financier genuinely takes credit risk and the exporter needs to move receivables off the balance sheet. Deferral wins when the buyer is solid, the exporter needs a fast and light product, and no one wants to restructure receivables.

A logistics company sourced berries and confectionery from Kyrgyz producers and sold to ten retail chains in Kazakhstan on 30-day terms after shipment. Producers needed to be paid today, the money came in a month later — the business stalled after every shipment.

With Dash deferral, the suppliers were paid right after customs clearance. The retail buyers paid us on the original terms. The exporter signed nothing with a bank and posted no collateral. The cash cycle went from a month to a day.