Georgia’s factoring law starts in 2027: what suppliers and funders should prepare

Factoring can give a supplier cash before a customer pays an invoice. Georgia’s new Law on Factoring sets a statutory framework for that financing method, the eligible factors, transfer and registration of receivables, debtor notice and collection. The law was adopted on 1 April 2026. On 19 August 2026, the National Bank of Georgia (NBG) confirmed that the framework will enter into force on 1 January 2027 and announced work on the supervisory framework for factoring platforms.

The commencement clause separates the main framework from the remainder of the statute: Articles 1–32 take effect on 1 January 2027, while the other provisions took effect upon publication in April 2026. As of 7 October 2026, the main factoring rules are therefore enacted but not yet operative. The NBG’s 4 September consultation deadline was not a deadline for final rulemaking. Article 33(3) gives the NBG up to nine months from the framework’s 1 January 2027 commencement to issue the listed implementing acts, so businesses should not assume that every detailed rule must be in force before launch. Check the rules as they are issued and before relying on a particular transaction. A separate transitional rule lets a person already conducting the covered activity (other than a commercial bank, micro-bank or microfinance organisation) file registration materials within 90 calendar days after the relevant NBG registration act takes effect and continue pending the NBG decision; a missed filing deadline or refusal requires the person to stop.

Which businesses may be affected

The law is relevant to companies that sell goods or services to business customers, including services involving intellectual-property products or rights. It is also relevant to debtors whose invoices may be assigned, banks and other permitted factors, companies considering a factoring business, and investors evaluating the new market.

The legislation is aimed at short-term receivables arising from a principal supply or services contract. “Short-term” means a receivable payable within one year of arising. Employment-related claims are excluded from the statutory receivables definition because “services” for this Law does not include employment relationships. Separately, a receivable arising from goods or services supplied for personal or household needs is generally outside factoring, unless that trade in goods or provision of services is part of the assignor’s entrepreneurial activity. A factoring arrangement is not simply any sale of debt or a substitute name for a loan.

Only specified factors may carry out factoring

The law lists commercial banks, micro-banks, microfinance organisations and NBG-registered factoring companies as eligible factors. A factoring company must be an LLC or joint-stock company and is subject to NBG registration and supervision. It must have paid-in capital of at least GEL 300,000 and maintain that minimum during its operation; its equity must also be at least GEL 300,000. A factoring company must have a supervisory board. The law prevents banks, micro-banks, microfinance organisations and their related parties from holding equity in a factoring company. For persons other than the commercial banks, micro-banks and microfinance organisations listed in Article 5(2)(a)–(c), Article 9(1) makes NBG registration mandatory if, under a claim-assignment agreement, they have at any point a right to at least five receivables simultaneously. Article 9(5) excludes transfers connected with enterprise reorganisation or merger and transfers under the Rehabilitation and Collective Satisfaction of Creditors’ Claims Law; the NBG may also establish transaction-specific exceptions. This is a statutory trigger, not merely a question to assess. Do not treat falling below five receivables, by itself, as permission to conduct factoring; check the other applicable rules.

An investor should also check the fit-and-proper and approval process before acquiring a significant share. The Law defines a significant share to include more than 10% or the ability to exert significant influence or control. Separately, Article 10(7) requires a prior NBG application, supporting documents and information on the source of funds where the planned acquisition would result in the buyer’s or its beneficial owner’s direct or indirect participation in capital or voting shares exceeding 10% or 50%. Do not assume that influence or control alone, without that ownership/voting threshold, triggers the specific filing duty in Article 10(7). The NBG considers the application within 30 calendar days; an acquisition without the required application, or after a reasoned refusal, is invalid. A factoring company may carry out only factoring and related services; it cannot accept deposits, and the Law restricts repayable funding, subject to specified exceptions. These rules matter when foreign investors structure capitalization or liquidity for a planned business.

The NBG’s official explanation also states that factoring transactions must be executed through a factoring platform registered under NBG rules. The Law separately bars a factoring-platform owner from also acting as a factor. The platform route is therefore a practical pre-launch dependency, alongside factor registration and the Public Registry filing. A supplier should confirm how the platform will verify the invoice, record the transaction and coordinate debtor notice before relying on the new structure.

The exact licensing, platform, reporting and supervisory steps depend on NBG implementing rules. A foreign parent, fund or group company should not assume that a general company registration or an existing finance licence abroad is enough to act as a Georgian factor.

Registration is central to the transfer

The new law establishes a Public Registry factoring register. The factor, rather than the supplier, submits the registration application. The factor’s ownership right in the transferred receivable becomes valid when the assignment is registered. The date of registration is also treated as the date of sale of the receivable for the statute’s purposes.

The written factoring agreement should identify the parties and the receivable, state the type of factoring and recourse terms, explain the fee, and include the underlying contract and invoice or other qualifying proof. The assignor must notify the debtor in writing no later than the next business day after transfer, with the information needed to pay the factor. The Law deems that notice served on the business day after the factoring agreement is entered in the factoring register. Once notice has been served before the debtor pays, payment to the original supplier does not discharge the obligation to pay the factor.

This makes the invoice and registry process part of the transaction itself. A lender and supplier should decide who checks eligibility, what documents support the receivable, who handles registration, when notice goes out, and how a paid invoice is removed from the register.

Non-recourse does not eliminate every seller risk

The law permits factoring with or without recourse. Without recourse, the factor generally cannot recover from the supplier just because the debtor does not pay. If the agreement does not make clear whether recourse applies, the law treats the arrangement as without recourse.

But that is not blanket protection for the supplier. The law makes the supplier responsible for the validity and amount of the assigned receivable. If the receivable becomes disputed, including because goods were defective, the supplier must pay the factor as provided in the factoring agreement even where the arrangement was described as non-recourse. Suppliers should therefore distinguish ordinary debtor credit risk from disputes about performance, invoice validity, set-off and credit notes.

Debtors retain relevant defences and set-off rights, subject to the statutory terms. Existing supply contracts should be checked for notice, dispute and reconciliation procedures. A clause that prohibits assignment to a factor or imposes additional conditions on it is void under the new law, but this does not remove the need to document a genuine invoice dispute or an agreed set-off.

What to do before 1 January 2027

Companies that may use factoring can prepare by mapping the invoices and counterparties they expect to finance, reviewing existing anti-assignment and notice clauses, standardising proof of delivery or service acceptance, and reconciling the invoice amount against any credit note or set-off. Debtors should establish who will verify a transfer notice and update payment instructions without paying a fraudster.

Potential factoring providers should monitor NBG registration and platform rules, assess both paid-in-capital and equity requirements and governance, and confirm the registration duty before marketing regulated services. A person already conducting covered factoring activity before commencement should calendar the 90-day transitional filing window that begins when the relevant NBG registration act takes effect; that person may continue only pending the NBG decision and must stop if the filing is late or registration is refused. Cross-border two-factor structures are contemplated, but the eligibility of each factor and documentation for a non-resident participant should be confirmed under the applicable rules.

A transaction checklist for suppliers and debtors

Before a supplier sells an invoice, it can prepare a short receivables file for each batch:

• The signed supply or services contract, including amendments and any delivery or acceptance record
• The tax invoice or, where the law permits, a uniquely identified invoice
• The amount currently payable, due date, currency and any credit note, payment or agreed deduction
• Evidence that the receivable arises from an eligible business supply and meets the short-term limit
• The proposed factoring agreement, including whether recourse applies and what happens if the debtor disputes performance
• The planned registry filing, debtor-notice process and payment details

Those documents serve different functions. The underlying contract establishes the commercial basis. The invoice identifies the payment claim. The registry entry gives the transfer its statutory effect. The notice tells the debtor where payment must go. If the names, amounts or dates differ between them, the seller and factor should reconcile the discrepancy before the claim is transferred.

Debtors should create a verification process for notices. A transfer notice changes the recipient of payment, so staff should confirm the invoice, seller, factor and bank details through a trusted channel already used with the supplier. They should check the relevant registry entry where available and preserve the notice and verification record with the invoice. This is especially important when a business receives several assignments or when a supplier’s finance provider changes during a project.

Hypothetical example: non-payment versus a defective delivery

Assume a Georgian supplier sells a GEL 80,000 invoice to an eligible factor after delivering equipment to a corporate customer. The assignment is registered and the customer receives the required notice. If the customer simply becomes insolvent and does not pay by the due date, the recourse clause determines whether the factor can demand repayment from the supplier. Under a clearly drafted non-recourse agreement, ordinary debtor non-payment is generally the factor’s risk.

Now assume the customer says part of the equipment was defective and withholds GEL 20,000. The new Law treats the supplier as responsible for the validity and amount of the transferred receivable and requires payment to the factor where the receivable becomes disputed, including because the underlying goods were defective, in accordance with the factoring agreement. Calling the deal “non-recourse” does not erase that separate performance risk. The supplier, factor and debtor should define how disputes, credit notes, partial acceptance and set-off are recorded before the first invoice is financed. This example is hypothetical and does not determine the result of a particular contract or dispute.

Drafting points that deserve separate attention

Define recourse precisely

The agreement should state whether the factor may claim against the supplier if the debtor does not pay, and list any separate seller obligations that remain for invoice validity, duplicate transfer, misrepresentation or defective performance. The law supplies a default classification if the parties’ agreement does not make recourse clear, but relying on a default invites disagreement about the parties’ commercial bargain.

Preserve the debtor’s file and defenses

The debtor may retain defenses against the factor that it had against the supplier when notified. A set-off agreement can also matter if it was in force when notice was delivered and directly covers the transferred claim. Suppliers should disclose relevant credits and disputes. Factors should request a complete reconciliation and include a process for later credit notes, returns or partial payments.

Prevent duplicate financing

The new register is intended to show which factor owns the relevant claim or part of it. The statute does not permit an assignment of the same receivable to several factors except for the specified split-ownership case. A supplier should maintain a receivable-level ledger linking each invoice, portion, factor, registration date, fee and payment status. A factor should check the register before advancing funds and register termination after full payment within the statutory period.

Align notice, payment and collection

After notice, the debtor must pay the factor in accordance with the underlying agreement’s due date. The agreement should state who sends notice, what proof of delivery is preserved, who handles collection, how interest or service fees are calculated and who updates bank details. The notice should not rely on a casual email alone if the parties’ contracts require a specific communications channel or authorized recipient.

Questions businesses may ask

Is every invoice eligible?

No. The law targets short-term payment claims arising from qualifying goods or services contracts, including certain intellectual-property transfers. Employment-related claims are excluded from the statutory receivables definition because employment relationships are not “services” for this Law. Consumer or household-use receivables are generally excluded, unless the relevant trade in goods or provision of services is part of the assignor’s entrepreneurial activity. Confirm the claim, payment term, supporting document and factor eligibility before describing a transaction as statutory factoring.

Can a customer contract prohibit assignment?

The Law says a debtor or pledgee cannot restrict the creditor’s right to transfer accounts payable to a factor or impose additional conditions; such a restriction or condition is void under the new framework. The parties still need to follow the statutory registration, notice and documentation rules, and a debtor may retain defenses and eligible set-off rights.

Can an overseas factor participate?

The Law contemplates two-factor arrangements with a Georgian-resident factor and a non-resident factor. That is not a blanket approval for any foreign fund or lender to carry out factoring in Georgia. Each participant’s status, role, registration and any NBG rules should be checked for the particular structure.

Does the law apply to invoices assigned before 2027?

The law’s transitional provision says it does not apply to transfers of accounts payable completed before the Law enters into force. The treatment of an old framework agreement and a later assignment, renewal or amendment depends on the facts and the commencement rules. Review the dates and documents rather than assuming an older master agreement places every later transaction outside the new regime.

For an assessment of receivables contracts, financing documents or a planned factoring business, contact Advokato for a consultation or message us on WhatsApp at +995 574 355 888.

This article is general information, not personalised legal advice. The new framework is future-effective as of 7 October 2026; verify the current NBG rules and transaction documents before relying on it.