FACTORING SERVICES

SBI FACTORS & COMMERCIAL
SERVICES PVT. LTD.
WELCOMES YOU ALL

AND
COMMERCIAL SERVICES LTD.
SBI FACTORS
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THE “
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KASH
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SOLUTION
SOLUTION
PRESENTS

FACTOR CUSTOMER
CLIENT
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INDUSTRIES THAT CAN
BE COVERED BY FACTORING
×
Small Scale Industries with growth potentials
×
Medium Scale Industries
×
Service Industries

Þ
Factoring is a financial service
covering the financing and collection
of accounts receivables in domestic
as well as in international trade.
Basically, factoring is an arrangement
in which receivables on account of
sale of goods or services are sold to
the factor at a certain discount.

Þ
As the factor gets the title to the
receivables on account of the
factoring contract, factor becomes
responsible for all credit control, sales
ledger administration and debt
collection from the customers.

 
Any of the two services to
be provided
Þ
The following services to be
provided by the factor; I) finance,
(ii) maintenance of accounts, (iii)
collection of debts and (iv)
protection against credit risk.

FACTORING V/S BILLS
DISCOUNTING
Þ
THE MAJOR DIFFERENCE BETWEEN
THE TWO IS THAT BILLS
DISOUNTING IS ALWAYS WITH
RECOURSE, WHEREAS
FACTORING MAY BE WITH OR
WITHOUT RECOURSE.

1. Individual Transaction.
2. Each bill has to be
individually accepted by
the drawee. This takes
time.
3. Stamp duty is charged on
certain usance bills
together with bank
charges. It proves very
expensive
1. Whole turnover basis.This also
gives the client the liberty to
draw desired finance only.
2. A one time notification is
taken from the customer at
the commencement of the
facility.
3. No stamp duty is charged on
the invoices. No charges
other than the usual finance
and service charge.
Bill Discounting Factoring

Bill Discounting Factoring
4. More paperwork is
involved.
5. Grace period for payment
is usually 3 days.
6. Original documents like
MTR, RR, Bill of Lading
are to be submitted.
7. Charges are normally up
front.
4. No such paperwork is
involved.
5. Grace period are far
more generous.
6. Only copies of such
documents are
necessary.
7. No up front charges.
Finance charges are
levied on only the
amount of money
withdrawn .

Þ
Buyer negotiates terms of
purchasing the material with the
seller. Buyer receives delivery of
goods with invoice and
instructions by the seller to make
payment to factor on due date

Þ
Buyer makes payment to factor in
time or gets extension of time or
in the case of default is subject to
legal process at the hands of the
factor

Þ
Seller MoU with the buyer in the
form of letter exchanged between
them or agreement Sells goods to
the buyer as per MoU/agreement

Þ
Delivers copies of invoice, delivery
challan, MoU, instructions to make
payment to factor given to buyer.

Þ
Seller receives 80 percent or more
payment in advance from factor
on selling the receivables from
buyer to factor. Seller receives
balance payment from factor after
deduction of factor’s service
charges, etc .

Þ
Parties to factoring – client, customer and
factor. Cost of factoring Service fee (for
administrating the sales ledger as well as
protection against bad debts – as a
percentage of invoice value or number of
invoices) Discount charges (advance
provided by factor and is interest which is
PLR plus or minus)

Þ
In bill discounting drawer
undertakes the responsibility of
collecting the bills and remitting
the proceeds to financing agency,
whereas a factor usually
undertakes to collect the bills of
the client

Þ
Bill discounting facility implies
only provision of finance but a
factor also provides other services
like sales ledger maintenance and
advisory services

Þ
Discounted bills may be
rediscounted several times before
they mature for payment. Debts
purchased for factoring cannot be
rediscounted, they can be
refinanced .

Þ
Factoring implies the provision of
bulk finance against several
unpaid trade generated invoices in
batches, bill financing is individual
transaction-oriented – each bill is
separately assessed and
discounted

Þ
Factoring is an off-balance mode
of financing. Bill discounting does
not involve assignment of debts as
is the case with factoring.

>
Problem 1 - Your buyer’s
credit risk.
E
Will your buyers pay you on time?
If they fail to pay or become
insolvent, will your company be
able to afford this type of loss?

>
Problem 2 - Your company
lacks cash flow.
Þ
Your company sells on open
account. You end up waiting many
days or more often months before
you are paid. Your business will
soon find itself short of working
capital.

>
Problem 3 - Managing your
sales ledger.
E
Your company has many
customers. Managing all of these
buyer accounts consumes an every
growing amount of time, energy
and resources.

>
Problem 4 - Collecting your
payment.
Þ
When your invoices get past due, you
must allocate precious time to
collecting the funds you are owed.


By utilizing accounts receivables
factoring services your company will
enjoy the following benefits:
>
Trade financing
>
Credit risk control and bad debt
protection
>
Management of sales ledger
>
Relief from collection headaches

Easy finance - by simply providing copies of
your documents and invoices that show you
have delivered the goods and your
company will then get trade finance and
other services of your choosing. More credit
sales will result in more finance for your
company.

Low cost - compared to working capital
loans and under factoring the finance
period is much more flexible. Using our
business invoice factoring services, your
company can:
>
Save significant interest expenses.
>
Outsource management of your sales
ledger.
Divert human resources to more
productive work.

Market expansion - using our
business invoice factoring
services, your company will
become more competitive and
gain a larger market share
because you will not have to fear
granting credit to your buyers.

Profit increase - when you have an
expanded market share, a risk
protection program in place,
enough cash flow to fund your
growth, you are sure to multiply
your profits.

THANK YOU

Our products:
REGULAR FACTORING FACILITY (RFF)
PURCHASE BILL FACTORING
FACILITY (PBF)
EXPORT FACTORING FACILITY (EFF)
OPEN ACCOUNT RECOURSE
FACTORING (OARF)

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