Factoring

GROUP MEMBERSGROUP MEMBERS

HINU CHAVANHINU CHAVAN

CAJITAN FERNANDESCAJITAN FERNANDES

RANBIR KAURRANBIR KAUR

LINCIA PADULINCIA PADU

VIRAJ THAKKARVIRAJ THAKKAR

0707

1313

2222

3636

5757

FACTORING

CONCEPT OF FACTORING

DEFINITION

The selling of a company's accounts receivable, at a discount, to a factor, who then assumes the credit risk of the account debtors and receives cash as the debtors settle their accounts also called accounts receivable financing.

CHARACTERISTICS OF FACTORING

Money Market Instruments

No Direct Payments

Two types of charges

Margin

PARTIES

BUYER OF THE GOODS(CUSTOMER)

SELLER OF THE GOODS(CLIENT)

FACTOR

FACTORING IN INDIAN CONTEXT

FACTORING COMPANIES IN INDIA

Canbank Factors Limited SBI Factors and Commercial Services Pvt. Ltd The Hong kong and Shanghai Banking

Corporation Ltd Foremost Factors Limited Global Trade Finance Limited Export Credit Guarantee Corporation of India

Ltd Citibank NA, India Small Industries Development Bank of India

(SIDBI) Standard Chartered Bank

How Factoring Works

CUSTOMER CLIENT

FACTOR

CREDIT SALE OF GOODS

Invoice

Pays the amount on maturity date

Payment up to 80%

Submit invoice copy

Balance 20% On

Realizations

TYPES OF FACTORING

Recourse Factoring Non Recourse Factoring Invoice Factoring Maturity Factoring Undisclosed Factoring Domestic Factoring International Factoring Guarantee Based Factoring

FUNCTION OF A FACTOR

Instant Cash Speedy Collection Sales ledger administration Credit protection Advisory services

ADVANTAGES

TO THE SELLER

3. LIQUIDITY4. OFF BALANCE SHEET FINANCE5. LEDGER MANAGEMENT6. OTHER ADD ON BENEFIT7. STATEMENTS

TO THE CUSTOMER2. ADEQUATE CREDIT PERIOD3. NO DOCUMENTATION4. PERIODICAL STATEMENT5. COMPANY CAN STRENGTHEN ITS

LINKS6. DOES NOT IMPINGE ON THEIR

RIGHTS

DISADVANTAGES2. IMAGE3. NOT SUITABLE FOR ONE TIME SALE4. HIGHER COST

DIFFERENCE BETWEEN

BILL DISCOUNTING & FACTORING

2. TRANSACTION

3. SETTLEMENT

4. NATURE

5. USE

6. SERVICES

7. PROCEDURE

EXAMPLE OF SBI FACTOR

ANY QUERY