Factoring
what, how, why, who is in factoring
how factoring work in the real world
Parties involved in factoring
working model
Typed of factoring
advantages and disadvantages
functions of factoring and process of factoring
conclusion
5. Factoring is a financial transaction in which a business sells its
accounts receivable to a third party at a discount.
6. Fast way for companies to raise money
Shortens the collections process
It allows companies to bring in money without taking on new debt
No need to have any collection department
Transfer of risk
9. Recourse Factoring
UPTO 75% TO 80% of the invoice receivable in factor
Interest is charged from the date of advance to the date of collection
Loss or non-recovery will be born by the client
Credit risk with client
Factor does not participate in the credit sanction process
10. Non-Recourse Factoring
Credit risk is with the factor
Higher commission is charged
Factor participates in credit sanction process and approves credit limit to the
client to the customer
Loss or non-recovery will be born by the factor
Factor
11. Maturity Factoring
Factor does not make any advance payment t client
Pay on guaranteed payment date or on collection of receivables
Payment date is fixed by client
Nominal commission is charged
No risk to factor
12. Cross-border Factoring
It is similar to Domestic factoring except that has 4 parties
a)Exporter
b)Export factor
c)Import factor
d)Importer
It is also called as two-factor system of factoring
High risk at all levels
13. Functions of factoring
Finance for the supplier
Maintenence of the receivables account
collection of receivables
protection aganist the payment dafault
“Full service” factoring offers all the above functions
Rendering consultancy services
Provision of finance aganist debts
Sales Ledger management