CHAPTER: 1 INTRODUCTION OF FACTORING

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1. OVERVIEW OF FACTORING: With the advent of globalization and liberalization, competition among firms-both domestic and international has increased. Globally, mergers and acquisitions are a common phenomenon. Indian corporates have to guard hostile takeovers. Both environmental and technological changes are rapid and a firm‟s strategy has to constantly keep pace with these changes. Financial market all over the world is facing rough weather. In the scenario, management of cash and receivables is of utmost importance to both giants and small firms. Much business has collapsed for want of liquidity. The key to success lies in converting credit sales into cash within a short period of time. There are many traditional methods such as cash credit, bills discounting and consumer credit through financial intermediaries that help in raising short term funds against credit sales or receivables. Recently, new financial services such as factoring and forfaiting have come into existence to assist the financing of credit sales and, thereby, help the business unit to tide over the liquidity crunch.

1.1 MEANING /DEFINATION OF FACTORING: The word „Factor‟ has been derived from the Latin word “Facere” which means „to make or to do‟. In other words, it means to get things done. According to the Webster Dictionary „Factor‟ is an agent, as a banking or insurance company, engaged in financing the operations of certain companies or in financing through purchase of account receivables. Definition: 1. Robert W. Johnson in his book „Financial Management‟ states, “ factoring is a service involving the purchase by a financial organization, called a factor, of receivables owned to manufacturers and distributors by their customers, with the factor assuming full credit and collection responsibilities”. 2. According to V.A.Avadhani, “factoring is a service of financial nature involving the conversion of credit bills into cash”. 3. In the words of Kohok, “factoring is an asset based means of financing by which the factor buys up the book debts of a company on a regular basis, paying cash down against receivables, and then collects the amounts from the customers to whom company has to supply goods”.

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1.2. PROCESS OF FACTORING: Factoring is a financial option for the management of receivables. In simple definition it is the conversion of credit sales into cash. In factoring, financial institution (factor) buys the accounts receivable of a company (client) and pays up to 80% (rarely up to 90%) of the amount immediately on agreement. Factoring company pays the remaining amount (balance 20% finance cost operating cost) to the client when the customer pays to the debt. Collection of debt from the customer is done either by the factor or the client depending upon the type of factoring. Pays to the debt. Collection of debt from the customer is done either by the factor or the client depending upon the type of factoring. Example are factoring against goods purchased, factoring for construction services (usually for government contracts where the government body is capable of paying back the debt in the stipulated period of factoring. Contractors submit invoices to get cash instantly), factoring against medical insurance etc. Let us see how factoring is done against invoices of good purchased.

Figure 1.2: Flow Chart of factoring Besides purchase of accounts receivables, a factor may provide a wide range of services, such as
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the following.     Credit management and covering the credit risk involved. Provision of prepayment of funds against the debts it agreed to buy. Arrangement for collection of debts. Administration of the dales ledger.

1.3

CHARACTERISTICS OF FACTORING:

2. Usually the period for factoring is 90 to 150 days. Some factoring companies allow even more than 150 days. 3. Factoring is considered to be a costly source of finance compared to other sources of short term borrowings. 4. Factoring receivables is an ideal financial solution for new and emerging firms without strong financials. This is because credit worthiness is evaluated based on the financial strength of the customer (debtor). Hence these companies can leverage on the financial strength of their customers. 5. Bad debts will not be considered for factoring. 6. Credit rating is not mandatory. But the factoring companies usually carry out credit risk analysis before entering into the agreement. 7. Factoring is a method of off balance sheet financing. 8. Cost of factoring = fiancé cost + operating cost. Factoring cost vary according to the transaction size, financial strength of the customer etc. the cost of factoring vary from 1.5% to 3% per month depending upon the financial strength of the client‟s customer. 9. Indian firms offer factoring for invoices as low as 1000Rs 10. For delayed payments beyond the approved credit period, penal charge of around 1 – 2% per month over the above the normal cost is charged (it varies like 1% for the first month and 2% afterwards).

1.4.

HISTORY OF FACTORING:

Factoring‟s origin lie in the financing of trade, particularly international trade. Factoring as a fact of business life was underway in England prior to 1400. It appears to be closely related to early merchant banking activities. The latter however evolved by extension to non – trade related financing such as sovereign debt. Like all financial instruments, factoring evolved

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over centuries. This was driven by changes in the organization of companies; technology, particularly air travel and non – face to face communications technologies starting with the telegraph, followed by the telephone and the computers. These also drove and were driven by modifications of the common law framework in England and the United States. Governments were latecomers to the facilitation of trade financed by factors. English common law originally held that unless the debtor was notified, the assignment between the seller of invoices and the factor was not valid. The Canadian Federal Government legislation governing the assignment of moneys owed by it still reflects this stance as does provincial government legislation modeled after it. As late as the current century the courts have heard arguments that without notification of the debtor the assignment was not valid. In the United States it was only in 1949 that the majority of state governments had adopted a rule that the debtor did not have to be notified thus opening up the possibility of non-notification factoring arrangements. Originally the industry took physical possession of the goods, provided cash advances to the producer, financed the credit extended to the buyer and insured the credit strength of the buyer. In England the control over the trade thus obtained resulted in an Act of Parliament in 1696 to mitigate the monopoly power of the factors. With the development of larger firms who built their own sales forces, distribution channels, and knowledge of the financial strength of their customers, the needs for factoring services were reshaped and the industry became more specialized. By the twentieth century in the United States factoring became the predominant form of financing working capital for the then high growth rate textile industry. In part this occurred because of the structure of the US banking system with its myriad of small banks and consequent limitations on the amount that could be advanced prudently by any one of them to a firm. In Canada, with its national banks the limitations were far less restrictive and thus factoring did not develop as widely as in the US. Even then factoring also became the dominant form of financing in the Canadian textile industry. Today factoring's rationale still includes the financial task of advancing funds to smaller rapidly growing firms who sell to larger more creditworthy organizations. While almost never taking possession of the goods sold, factors offer various combinations of money and supportive services when advancing funds. Factors often provide their clients four key services: information on the creditworthiness of their prospective customers domestic and international; maintain the history of payments by

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customers (i.e., accounts receivable ledger); daily management reports on collections; and, make the actual collection calls. The outsourced credit function both extends the small firms effective addressable marketplace and insulates it from the survival-threatening destructive impact of a bankruptcy or financial difficulty of a major customer. A second key service is the operation of the accounts receivable function. The services eliminate the need and cost for permanent skilled staff found within large firms. Although today even they are outsourcing such back office functions. More importantly, the services insure the entrepreneurs and owners against a major source of a liquidity crises and their equity. In the latter half of the twentieth century the introduction of computers eased the accounting burdens of factors and then small firms. The same occurred for their ability to obtain information about debtor‟s creditworthiness. Introduction of the Internet and the web has accelerated the process while reducing costs. Today credit information and insurance coverage is available any time of the day or night on-line. The web has also made it possible for factors and their clients to collaborate in real time on collections. Acceptance of signed documents provided by facsimile as being legally binding has eliminated the need for physical delivery of “originals”, thereby reducing time delays for entrepreneurs. By the first decade of the twenty first century a basic public policy rationale for factoring remains that the product is well suited to the demands of innovative rapidly growing firms critical to economic growth. A second public policy rationale is allowing fundamentally good business to be spared the costly management time consuming trials and tribulations of bankruptcy protection for suppliers, employees and customers or to provide a source of funds during the process of restructuring the firm so that it can survive and grow.

1.5.

FACTORING IN INDIA:

The Reserve Bank of India (RBI) formed a committee headed by C.S.Kalyansundaram, a former managing director of the State bank of India (SBI) to examine the need for and scope of factoring organization in India. The committee submitted its report in December 1988 and recommended introduction of factoring services in India. The RBI advised banks to take up factoring activity through a subsidiary. SBI Factors And Commercial Services: The State Bank of India, in association with the State bank of Indore, the State Bank of Saurashtra, the Small Industries Development Bank of India and the Union operation from April 1991. SBI Factors was the first factoring company to be set up in India. It has a 45% market share in this business.

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SBI factors offer a product called KASHFLA with recourse factoring facilities alongwith flexible services. This product is mainly targeted at small- scale industries (SSI) and microcorporates. Big Corporates are not only served by banks and financial institutions, but they can raise funds from abroad at cheaper rates. Hence, to withstand, the competition posed by such big corporates, the small scale industry is in need of better SSI sector enabling to remain competitive and profitable. SBI factors has recently launched new product such as „Purchase Bill Factoring‟ & „Factoring of invoices drawn under LC/Bank Guarantee‟. It also offers factoring at highly competitive rates to top rated corporates. With a view to extending factoring facilities to small – scale industries and small traders/service provider, it has reduced the minimum cutoff limit from Rs. 20 Lakh to Rs. 10 Lakh. Can bank Factor Limited is another factoring company and it is also into recourse factoring. Can bank Factors is a subsidiary of Canada Bank and was incorporated in the year 1991 with Small Industries Development Bank of India(SIDBI) and Andhra Bank as copromoters. It is registered as a non – banking finance company (NBFC) and hence is governed by the regularity norms of the RBI. Can bank Factors is the leader in the factoring industry in India with a market share of around 55% and a cumulative turnover of Rs. 4600 crore (as on 31 March 2001). It extends export factoring services also. In export factorings, the export factor appoints an import factor, who provides credit protection/exposure limits for a particular importer. The export factor after getting the approval of the import factor provides financial assistance to the Indian exporter. In export factoring, there is no requirement of an LC or a credit insurance cover. Export factoring is also extended by foremost factors in small volumes. To promote international factoring, a company called Global Trade Finance Private Limited was set up in September 2001. It is promoted by West Deutesche Landesbank Girozentrate, EXIM Bank of India, and International Finance Corporation for cross – border factoring Services.

Now there are 9 Companies who has started factoring in India: 1. Canbank Factors Limited 2. The Hong Kong and Shanghai Banking Corporation Ltd. 3. Foremost Factors Limited 4. Global Trade Finance Limited

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5. Export Credit Guarantee Corporation of India Ltd 6. Small Industries Development bank of India 7. SBI Factors and Commercial Services Private Limited 8. Standard Chartered Bank 9. Citi Bank NA, India

1.6.

FACTORING IN OTHER COUNTRIES:

In European countries, factoring organizations have an option to finance both domestic and export business. The tough business conditions and continued recession across Europe have affected the factoring business of late. Hence, some factoring organizations had to wind up their business in the U.K. as well as in the U.S.A. again; there has been merger of factoring companies. Now, more than 700 factoring companies are operating in some forty countries. Nine out of ten of the world‟s strongest banks now have their own foothold in the factoring industry. In the U.S.A., the Fuji Bank‟s Chicago based Heller financial has taken over the CTI Group factoring. It has become the biggest U.S. factor. Similarly, BNY Financial acquired BT factors in 1990. Again, Citizen‟s and Southern Commercial acquired the Security Pacific in 1989 and it is now called „National Bank Commercial‟. In all, there were 17 big factors and the total U.S. factoring business volume was more than $51 billion in 1991. In the U.S.A. the factoring organisations specialize in financing the apparel business which accounts for nearly 75% of the total volume of factoring business. Italy occupies the first position in terms of factoring business volume; followed by U.S.A. the U.K. occupies the third Position.in Japan, the first specialized factoring company was established only in 1972 when Sanwa Bank started the Sanwa Business Credit Co. The special feature of promissory notes in contrast to cash financing of accounts receivables. Factoring is also becoming popular in North America, Asia, Singapore, Malaysia and South Korea. It is said that factoring in Singapore and Malaysia is growing at a faster rate of 40% a year. However, export factoring is popular in countries like Germany, Belgium and Netherland where the export factoring business accounts thinking of introducing such a scheme very shortly. The latest country to take up the business of factoring is China, which is giving importance to export factoring.

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1.7.

TYPES OF FACTORING:

Based on the features built into the factoring transactions, different types of factoring arrangement have come into existence. 1. Recourse Factoring: In recourse factoring, the factor purchases trade debts and essentially renders collection service and maintains sales ledgers. But, in case of default or non – payment by a trade debtor, the client refunds the amount to the factor. Hence, recourse factoring does not include bad debts protection. It is popular in the developing countries. 2. Non-Recourse Factoring: Under non – recourse factoring, the factor‟s obligation to the client become absolute on the due date of the invoice, irrespective of the payment made or not made by the trade debtor. In other words, if the trade debtor fails to make a payment, the factor cannot recover this amount from the client. In non- recourse factoring, factor charges are high as they offer the client protection against bad – debts. The loss arising out of irrecoverable receivables is borne by the factor. This type of factoring arrangement is found in developed countries such as UK and USA, where reliable credit rating services are available.

3. Advance and Maturity Factoring: Sometimes, the factor and the client make an arrangement whereby the factor pays a pre – specified portion of the factored receivables in advance to the client on submission of necessary documents. This type of arrangement is known as advance factoring. The balance portion is paid upon collection or on the guaranteed payment date. Generally, factoring is advance factoring and factor pays 80% of the invoice amount in advance. Under maturity factoring no advance payment is made by the factor but payment is made only on the guaranteed payment date or on the date of collection. Maturity factoring is also known as collection factoring.

4. Old Line Factoring: Old line factoring is also known as full factoring as it provides an entire spectrum of services, such as collection credit protection, sale ledger administration, and short term finance. It includes all features of non – recourse and advance factoring.

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5. Cross – Border Factoring/ International Factoring: In domestic factoring, three parties are involved, namely, customer(buyer), client(seller) and factor(financial institution or intermediary) while in international factoring there are four parties, namely exporter(clients), importer(customer), export factor, and import factor. Thus, in international business transaction, factoring services are provided by factors of both countries, that is, the exporter country‟s factor and the importer country‟s factor. This is known as cross – border factoring or international factoring.

6. Invoice Discount: Invoice discount is a variant of factoring. It provides finance against invoices backed by letters of credit of banks. The factor provides finance once the letter of credit opening bank confirms the due date of payment.

7. Limited Factoring: Under this type, the factor does not take up all the invoices of a client. He discounts only selected invoices on merit basis and converts credit bills into cash in respect of those bills only.

1.8.

ADVANTAGES OF FACTORING: Factoring is beneficial to the client, is customers, and banks.

Benefits to the Client: The benefits to the clients are as follows.  The client‟s credit sales are immediately converted into ready cash as the factor makes a payment of around 80% of the factored invoices in advance. This proportion of finance is higher than the bank finance against credit sales.    The client can offer competitive credit terms to his buyers which, in turn, enable him to increase his sales and profits. The cash realized from credit sales can be used to accelerate the production cycle. The client is free from the tensions of monitoring his sales ledger and can concentrate on production, marketing, and other aspects. This results in a reduction in overhead expenses and an increase in sales and profits.  Factoring result in a close internation among working capital components of the business. Efficient management of one component can have positive impact on other component. For example, an increase in liquidity enables the firm to avail of discounts on

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purchases of raw materials.   The factor provides a comprehensive credit control system by analyzing payment history. This helps in assessing the quality of the debtors and monitoring their financial health. The client can expand his business by exploding new markets.

Benefit to Customer (Buyers): The benefits that the customers enjoy are as follow.    Factoring facilities the credit purchases of the customers as they get adequate credit period. Customers save on bank charges and expenses. The customer has not to furnish any documents. He has merely to acknowledge the notification letter, that is, an undertaking to make payment of the invoices to the factor. Customers are furnished with periodical statements of outstanding invoices by the factor.  Factoring does not impinge on the customer‟s rights vis-à-vis the supplier‟s in respect of quality of goods, contractual obligations and so on.

Benefits to Banks: The benefits that the banks enjoy are as follow.   Factoring improves liquidity of the clients and, thereby, improves the quality of advances of banks. Factoring is not a threat to banking; it is a financial service complementary to that of the banks . 1.9. FUNCTIONS OF FACTORING: As started earlier the term „factoring‟ simply refers to the process of selling trade debts of a company to a financial institution. But, in practice, it is more than that. Factoring involves the following functions: a. Purchase and collection of debts b.Sales ledger management c. Credit investigation and undertaking of credit risk d.Provision of finance against debts e. Rendering consultancy services. a. Purchase and Collection of Debts: Factoring envisages the sale of trade debts to the factor by the company, i.e., the client. It is where factoring differs from discounting. Under discounting, the financier simply discounts the debts backed by account
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receivables of the client. He does so as an agent of the client. But, under factoring, the factor purchases the entire trade debts and thus, he becomes a holder for value and not an agent. Once the debts are purchased by the factor, collection of those debts becomes his duty automatically. b.Credit Investigation and Undertaking of Credit Risk: Sales ledger management function is a very important one in factoring. Once the factoring relationship is established, it becomes the factor‟s responsibility to take care of all the functions relating to the maintenance of sales ledger. The factor has to credit the customer to resolve all possible disputes. He has to inform the client about the balances in the account, the overdue period, the financial standing of the customers, etc. Thus, the factor takes up the work of monthly sales analysis, overdue invoice analysis and credit analysis. c. Credit Investigation and Undertaking of Credit Risk: The factor has to monitor the financial position of the customer carefully, since; he assumes the risk of default in payment by customers due to their financial performance record, his future ability, his honesty and integrity in the business world etc. For this purpose, the factor also undertakes credit investigation work. d.Provision of Finance: After the finalization of the agreement and sale of goods by the client, the factor provides 80% of the credit sales as prepayment to the client. Hence, the client can go ahead with his business plans or production schedule without any interruption. This payment is generally made without any recourse to the client. This is, in the event of non- payment, the factor has to bear the loss of payment. e. Rendering Consultancy Services: Apart from the above, the factor also provides management services to the client. He informs the client about the additional business opportunities available, the changing business and financial profiles of the customers, the likelihood of coming recession etc.

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1.10.

FACTORING CHARGES:

FACTORING CHARGES FINANCE CHARGES
Figure 1.10: Factoring charges 1. Finance Charge: Finance Charge is computed on the prepayment outstanding in the client‟s account at monthly interval. Finance charges are only for financing that has been availed. These charges are similar to the interest levied on the cash credit facilities in a bank. 2. Service Fee: Service Charges are a nominal charge levied at monthly intervals to cover the cost of services, namely, collection, sales ledger management, and periodical MIS reports. Service fee is determined on the basis of criteria such as the gross sales value, the number of customers, the number of invoices and credit notes, and the degree of credit risk represented by the customers or the transaction. Both these charges taken together compare very favorably with the interest rates charged by

SERVICE CHARGES

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banks and financial institutions for short – term borrowings.

1.11. LEGALASPECT OF FACTORING: Upon entering into a factoring arrangement, the client agrees to serve a notice of assignment in the prescribed form to all customers, whose receivables have been factored.  The client agrees to provide all copies of invoices, challans, and other evidences relating to the factored account and also remit any payment received, if any, by him against the factored invoices.    The factor requires a power of attorney to assign the debts and to draw negotiable instruments in respect of such debts. The legal status of the factor is that of an assignee. In case of multiple finance (i.e., a part of book debts is financed by bank and part by factoring), the letter of disclaimer is required by factor so that there is no duplicate charge and double financing is avoided.  Factoring transaction attract stamp duty to assign all debts.

1.12. DISTINGUSIH BETWEEN : a. Factoring and Forfaiting:  Forfaiting is usually for international credit transactions of long – term maturity periods ranging between 90 days and up to 5 years. Factoring is for transactions of short term maturities not exceeding six months.  Forfaiting is 100 percent financing without recourse to thee exporter. Factoring can be with recourse or without recourse depending on the terms of transaction between the seller and the factor.  In forfaiting, the cost (charges) consists of three elements – discount rate, commitment fees, and handling fees, which are ultimately borne by the importer. The cost of factoring is usually borne by the seller.  In forfaiting, the complete sales ledger of the exporter is not handled by the forfeiter. Forfaiting, structuring and costing is tailor – made and on a case – to – case basis. Under factoring, the factor handles the entire sales ledger at a predetermined price. Factoring requires the assignment of whole turnover with a buyer on a continuous basis. Factoring is a continuous and revolving facility.

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In forfaiting, there is a forfeiter and a bank involved in the transaction while in international factoring, there is a two factor system – the export factor and the import factor, with no bank involved in the transaction.

b. Factoring and Bills Discounting:  Bills discounting is an individual transaction in the sense that each bill is separately assessed and discounted. Factoring is a financial service provided by a financial institution/ intermediary on a whole turnover basis. Factoring is the provision of bulk finance against several unpaid trade invoices. This gives the client the liberty to draw desired finance only.  In case of bills discounting, each bill has to be individually accepted by the drawee, which takes time. In factoring a one – time notification is taken from the customer at the commencement of the facility.  Bills discounting is an expensive short – term source of finance as stamp duty is charged on certain usance bills together with bank charges. In case of factoring, no stamp duty is charged on the invoices and hence it is less expensive than bills discounting.     Bills discounting involves more paper work as compared to factoring. In case of bills discounting, the grace period for payment is usually three days while in case of factoring, the grace period is higher. Bills discounting requires submission of original documents such as bills of lading, challans, and invoices. Only copies of such documents are required in factoring. In bills discounting, charges are normally upfront whereas there are no upfront charges in case of factoring. Finance charges are levied on the amount of money withdrawn.  Bills discounting is more domestic – related and usually falls within the working limits sets by the bank for the customer. Factoring may be domestic or international and is not concerned with the working capital limits set by the bank.  Bills discounting does not involve assignment of debts while factoring involves assignment of debts.

c. Factoring and Cash Credit:

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Commercial banks allot two types of credit limits for their clients – the cash credit limits and the loan limit. The cash credit limits is for working capital requirement and is short term in nature. The cash credit funds can be withdrawn at a short notice for working capital requirements.  In cash credit, the margin retained on receivables is usually 40 to 50 percent as banks have no means of following up sundry debtors, while in cash of factoring, the margin retained is 20 percent  In case of cash credit, the drawing power on the basis of stock statements is computed once a month. If invoices are raised between submissions of stock statements, no money can be drawn against them. Factoring is like cash sales – prepayments against invoices are made as and when they are factored.  In case of cash credit, the client has to submit various statements to the banks while no statements are to be submitted to the factor. On the contrary, the factor furnishes various reports to both the clients and the customer.    The bank does not provide collection services to its clients while a factor renders debts collection service to its clients. In case of cash credit, once a book debt exceeds its usance period, it is removed from the eligible list. In factoring, the factor allows generous grace period on factored receivables. To avail cash credit facilities, processing fees are about one percent of the limit and interest is linked to the prime‟s lending rates. In case of factoring, the maximum processing fees are fixed and a finance charge is linked to the cost of funds.

Thus, factoring tends to increase the number of rotations by converting credit sales into cash sales in a manner that banks cannot accomplish.

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CHAPTER: 2 INTERNATIONAL FACTORING

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2.1. MEANING/ DEFINATION OF INTERNATIONAL FACTORING: Generally factoring services are very popular for domestic business. They are gradually entering into export business also. International factoring facilities international trade. It is a comprehensive range of receivables management and financing services wherein a factor provides an exporter with at least two of the following services.  Credit management and bad debt protection.  Credit guarantee.  Finance upto 90 percent of the invoice value on shipment to approved debtor.  Collection services.  Professional sales ledger and analysis. International factoring eases much of the credit and collection burden created by international sales. Export receivables that can be factored should have the following characteristics.  The buyer‟s country should be covered by the factor.  The exporter‟s performance obligation should be completed at the time the exporter presents an invoice for prepayment.  There should be multiple shipments or a continuous sales flow on an ongoing basis with the same buyer or buyers. These should be assignment of the whole turnover with a buyer on a continuous basis.  Factoring transactions are best suited for credit periods upto 180 days and factoring
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facilities are typically provided for „ open account‟ transactions.in the absence of this, the buyers would have to open a letter of credit (LC), thereby blocking bank limits.

2.2. NEED FOR INTERNATIONAL FACTORING: An Exporter requires international factoring services to relieve him of the problems of collecting receivables in a foreign country and the tensions arising from the unfamiliarity with the customer‟s creditworthiness. Moreover, the demand for open account trading has expanded globally and Indian exporters are also required to offer similar terms to importers in order to remain competitive. This has created a demand for better credit risk protection services arising out of importers delaying payments or not making any payments at all. International factoring provides credit assessment and protection, financing and collection services to exporters for regular sales in open account terms. International factoring requires no collateral or letter of credit (LC). A letter from a bank to a foreign bank authorizing the payment of a specified sum to the person or company named is known as letter of credit (LC). Letters of credit are widely used as a means of payment for goods in a foreign trade. An export factor in India pays 90% as advance on the approved invoices and also a 100% risk protection on the receivables in the event of the buyer‟s failure to pay including insolvency.

2.3. BENEFIT OF INTERNATIONAL FACTORING: The exporter deals with only one factor even if his exports are spread across different countries. He can obtain experience of the correspondent factor not only in terms of getting an access to the creditworthiness of the buyer but also in legal laws and business practices of these countries. The exporter‟s risk and bad debts are reduced. He can expand his business by exploiting new markets. The Importer also benefits as he pays the invoice amount to a factoring company in his own country. This is similar to making payment to domestic suppliers. The importer gets an access to open account credit terms. In the absence of this, he would have to open letter of credit (LC), thereby blocking his bank limits.

2.4. FLOW CHART OF INTERNATIONAL FACTORING TRANSACTION: In international factoring, there are four parties, that is, the exporter (client), the importer

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(customer), the export factor and the import factor. International faction is a two factor system. The export factor services the needs of clients in India while the import factor undertakes the credit assessment of customer keeping in view the macro – conditions of the country and industry specific factors. It also undertakes collection and follow – up required for realization on maturity. In international factoring, there is no bank involved in the transaction. All the necessary documentations and the RBI formalities are performed by the export factor who is an authorized dealer.  The exporter receives an order on regularly receives orders from an importer or importers and is able to estimate the financing requirement.  The exporter provides the export factor with contract details of its customer‟s alongwith estimates of the credit limits. The export factor forwards these details to correspondent import factors in the relevant country.  On approval of the exporter‟s credit limits, the exporter enters into a factoring agreement with the export factor.  The exporter ships the goods to his customer (importer).  The exporter submits the relevant documents such as invoice, bill of lading/airway bill, GR form, and so on to the export factor.  The export factor scrutinisies the documents and makes a prepayment as agreed upon to the exporter.

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The export factor directly forwards the documents to the customer(s) under advice to the correspondent factors.    The correspondent factor (import factor) follows up with the customers and collect payments from them. The correspondent factor (import factor) collects the payment and immediately remits it to the export factor. On collection, the export factor credit the balance payment to the exporter‟s account after adjusting for prepayment made. Factoring is most suitable for manufacturing and trading companies. It is also suitable for advertising, agencies, solicitors and legal firms, architect firms, medical firms, construction and engineering contracts and software firms.

2.5. INTERNATIONAL FACTORING CHARGES: In international factoring, there are two types of charges: discount charges and services charges. The factor levies a discount charge for prepayment and service charge for allied services, which includes a 100 percent risk protection. The charge is generally calculated as a percentage on a flat basis on the gross invoice value.

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2.6. FACTOR CHAIN INTERNATIONAL: FCI is a global network of leading factoring companies whose common aim is to facilitate international trade through factoring and related financial services. It provides modern and effective communication systems to enable factors to conduct their business in a cost effective way. It also provides a legal framework to protect exporters and importers. It has developed standard procedures of factoring to maintain a universal quality. It also undertakes worldwide promotion to position international factoring as the preferred method of trade finance. According to FCI, the growth rate in international factoring is greater than the growth rate in domestic factoring.

2.7.

TYPES OF EXPORT FACTORING: Generally, in the absence of factoring, all export finance transactions are backed by the Letter of Credit. But, factoring relates purely to „Open Account transaction‟ with no promissory notes and collaterals. Factoring is done entirely on the basis of the invoice prepared by the exporter and so it is purely an “invoice – based export finance” technique. In an international factoring transaction, there are four parties namely: i. The exporter who is taking the place of a client in a domestic transaction.

ii. The importer who is taking the role of a customer in a domestic transaction. iii. Export Factor(EF) and iv. Import Factor(IF) The exporter (client) and the factor enter into an agreement for export factoring which may take any one of the following types:

TYPES OF EXPORT FACTORING

TWO FACTOR SYSTEM

SINGLE FACTOR SYSTEM

DIREXT EXPORT FACTOR SYSTEM

DIRECT IMPORT FACTOR SYSTEM
22

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1 Figure: 2.7

i.

TWO FACTOR SYSTEMS: There are two factors under this system – one in the

Export‟s country and the other in the importer‟s country. When the exporter wants to do business with some importer or importers, he approaches the factor in his country and informs him of his business proposal, the likely size of the consignment and the currency involved. This export factor informs the same to his counter- part, i.e., import factor in the financial position of the importer and his dealings and, if satisfied, he conveys the message to the export factor. He also indicates the limits for factoring and his commission for undertaking this work. Then, the export factor contacts the exporter and conveys the positive findings and his readiness to cover the credit risk through factoring. If the rates are acceptable to the exporter, he signs an agreement with the export factor. Once this factoring, relationship is established, the exporter sends the goods to the importer along with the invoice with a condition that the payments should be made to the import factor. Two copies of the invoices are sent to the export factor along with a notification that the debts have been assigned to the import factor. At this stage, the export factor makes payment immediately to the extent of 80% of the invoice amount to the exporter. Thereafter, the export factor informs the import factor about the financial deal by sending a copy of the invoice. Now, it becomes the responsibility of the import factor to monitor and maintain the account and take all possible efforts to collect the amount at the due dates. When the amount is collected, it is sent to the export factor. In case of any default, the import factor has to pay the amount to the export factor from his own sources. When the amount is realized from the import factor, the exporter factor pays the balance of 20% of the invoice amount to the exporter. The cost of factoring is debited to the exporter‟s account and the commission due to the import factor is also sent. Thus, the financial dealing has to be carried out with the help of two factors and hence it is called „Two factor system‟.

ii.

SINGLE FACTOR SYSTEM:

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Under this system also, two factoring companies, as started earlier, are involved. However, the responsibility of making the payment, maintenance of books of accounts, its administration etc., initially rest with the export factor. But, just to cover the credit risk, the export factor enters into an agreement with the import factor to collect the debt in favor of the import factor. Thus, the import factor is called upon to assist the export factor only during the times of difficulties in realizing the debt. Otherwise, the export factor himself will do all the work. So, it is called „Single factor System‟.

iii.

DIRCT EXPORT FACTOR SYSTEM: Under the system, there is a factoring agreement directly between the exporter and this export factor and no other party is involved. The entire export credit risk, the administration of the account, the advance payments etc., have to be done only by the export factor. Hence, it is called „direct‟ export factor system.‟

iv.

DIRECT IMPORT FACTOR SYSTEM: It is just the opposite of direct export system. The agreement is between the exporter and the import factor in the importer‟s country. The import factor assumes all responsibilities for the collection of the debt from the importer.

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CHAPTER: 3 THE ROLE OF FACTORING FOR FINANCING SMALL AND MEDIUM ENTERPRISES IN INDIA

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3.1.

INTRODUCTION:

Small and Medium Enterprises (SMEs) have played a significant role world over in the economic development of various countries. India, certainly, is no exception. Over a period of time, it has been proved that SMEs are dynamic, innovative and most importantly, the employer of first resort to millions of people in the country. SMEs in India have recorded a sustained growth during last five decades and today, SMEs have substantial share in industrial production, export and employment. The sector contributes 40 % of the gross value added in manufacturing, around 35 % to direct exports, provides employment to around 28 million people in the country and is a breeding ground for entrepreneurship. Keeping in view its importance, the promotion and development of SMEs has been an important plank in our policy for industrial development and a well-structured programmer of support has been pursued in successive five-year plans forth promotion and development of Semi the country. India embarked on the path of opening up its economy and integrating it with the global economy in 1991. The liberalization of economy, while offering tremendous opportunities for the growth and development of Indian industry Including SMEs, has also thrown up new challenges in terms of fierce competition both in domestic and international markets. The very rules which provide increased access for our products in the global market also put domestic industry under increased competition from other countries, not only in exports but also in the domestic market. In today‟s world, technology, competitive strength together with benchmarking with the best international standards and practices have become the drivers of change and accelerated growth. Access on a global basis to modern technology, capital resources and markets have become the most critical determinants of international competitiveness. This underscores the need for SMEs to be internationally competitive in terms of quality, delivery, after-sales service, price, etc. The need of the hour for Indian SMEs is top grade their technology, quality and adopts modern management techniques to keep pace with the changes that are taking place in the global market. Investment would be a prerequisite in these areas to bring about transformation. The availability of adequate credit at affordable cost, thus, becomes critical for Indian SMEs. There exists a well-developed network of financial institutions at national and state level to

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channelize credit to SMEs. SIDBI is the national level principal financial institution for promotion, financing and development of SMEs. It provides direct assistance to the SSI sector through several schemes like direct discounting, project finance , assistance for technological upgradation and modernization, marketing, finance, resource support to institutions engaged in developing SSIs, venture capital, factoring services, etc. It also provides indirect assistance comprising refinance, bills re-discounting (equipment) and against inland supply of bills through an organized network of 910 Primary Lending Institutions (PLIs) including banks and SFCs with more than 65,000 outlets throughout the country. In order to enhance the flow of credit to the sector, various initiatives have been taken by the Government of India/Reserve Bank of India from time to time, viz. enhancement of loan limit under Composite Loan Scheme, increase in project cost limit under National Equity Fund ( NEF ) Scheme ,launching of Credit Guarantee Fund Trust for Small Industries , extension of concessional assistance under Technology Development and Modernization Fund Scheme, introduction of special schemes for modernization of units under Technology Upgradation Fund Scheme for textiles and jute industries, Tannery Modernization Scheme and Credit Linked Capital Subsidy Scheme for Technology Upgradation .Further, to give focused attention to the needs of SSIs, public sector banks have sofa opened 391 specialized SSI branches. Last year, the Government of India has announced that the credit to SMEs would be doubled in the next five years. Various policy directives and schemes have been announced from time to time to help improve the credit flow to the sector. The credit rating system for SMEs has recently been introduced to ensure availability of adequate and timely credit at low cost. Dedicated agencies for credit rating to SSI sector have been created with a provision of subsidized credit rating charges. The concept and practice of cluster financing has been brought into practice. Besides, the RBI has recently allowed banks to appoint business correspondent s for collecting deposits and

delivering credits. This could decline from 17.5 % in 1998 to 8.5 % in 2006. Lack of credit at reasonable rate has hindered the growth of SMEs in the past. According to the third All India Census of Small Scale Industries, there are rounds 11.85 million small scale units in India, out of which, only 1.63 million are registered and re stare unregistered. Only 14.26 %of the units in registered sector and 3.09 % in unregistered sector have access to institutional finance. The coverage of institutional finance, thus, is far from satisfactory. It is no wonder that according to a survey conducted by SSI Ministry in

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2003-04, 48% of the respondents cited shortage of Working capital as at the key reason for sickness in the industry. On-availability of acceptable collateral is the major problem at the time of starting adventure. The problems get further compounded in case of young and women entrepreneurs. Even though the Government along with SIDBI has set up a Credit Guarantee Fund Trust for Small Industries (CGTSI), to encourage banks to extend financial assistance to SMEs without collateral, the banks still seem to be hesitant to extend credit to SMEs. Similarly, despite a scheme for technology and quality upgradation with a subsidy component, the disbursement under the scheme is certainly below expectations. It is clear from the above, that despite the best intentions of the Government to expand the credit to SMEs, the results are far from satisfactory. It calls for an urgent need to have are look on the policy measures for the promotion of SMEs and iron out the problems hindering the growth of credit to this sector. Following points could be considered: First, a very important issue to understand is the composition of Indian SMEs and their financing needs. As per third All India SSI Survey, out of 11.85 million SSI units in India, more than 99 % units falls in the category of tiny, i.e. investments in plant and machinery of these units is less than Rs. 25 lakh. Even in this tiny sector, majority of them would be very small and would include cottage industries and artisans. Only a few lakhs would actually form what can be termed here as modern SSI sector having investments in plant and machinery in the range of Rs. 25 lakh to Rs. 1 crore. The financing needs of these modern SSIs along with medium enterprises, say with an investment in plant and machinery less than Rs. 10 crore, are, most of the time, quite different than that of tiny enterprises. These big units among the SSI sector would often require funds mainly for diversification and expansion of the business and technology upgradation that needs to be dealt with separately. The schemes like credit ratings are most relevant to this sector. On the other hand, micro financing would be a very effective tool for financing smallest of small enterprises providing coverage to a large number of small units and also reducing the risk of banks. Further, there is a need of reorientation of government functionaries to this vast range of SMEs. It will be in the best interest of the sector if government officials are properly designated to take care of certain set of SSIs and the relevant schemes. Second, one will have to realistically assess the positions of banks and other financial institutions in this regard. They have the concerns about the NPAs and the growing incidences of sickness in SSIs. Obviously, financing of SMEs should be profitable venture for banks so that they can extend credit to

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SMEs. As the large enterprises have access to alternative sources of financing, like capital markets and often the rate of interest is very low in case of large enterprises, banks have also started looking at SMEs as a potential thrust area. However, this needs to be further strengthened by the right mix of promotional policies reducing the risk of banks while financing the SMEs. Banks, on their part, would do well by providing adequate publicity to various promotional schemes so that a large number of units could get benefited. Third, it is often observed that there is a lack of understanding of the government policy directives and guidelines and schemes of the RBI and the SIDBI on the part of field level functionaries of financial institutions. The officials need to be sensitized regarding the needs of the SMEs through proper Training. Fourth, a number of private banks are venturing in the field of S M E financing with innovative schemes. Besides, cluster financing and innovative financing schemes like factoring are emerging as powerful tools for extending credit to SMEs. Credit rating is also gaining prominence. However, again there is a lack of understanding of these schemes on the part of banks and other financial institutions as well as SME entrepreneurs. It, therefore, becomes extremely important to engage SMEs and financial institutions and

apex SME developmental agency in a constructive dialogue to ensure better understanding of policies and schemes. SME associations should come forward in this regard and organize programmes in which all the stakeholders could be invited and the schemes could be popularized. Fifth, the SME associations and NGOs should come forward and accept more responsibilities. Their role should not be limited to only lobbying for their members. The associations and NGOs can play a crucial role in micro financing. They could also provide specialized services to the SMEs in preparation of project documents and help in procedural aspects and could also help banks in assessing the risk for financing a venture. Sixth, a few changes and improvements in the policies could help infuse credit to this sector. Equity participation ceiling of large companies in small scale sector should be raised from 24 % to 49 %. It would certainly motivate large enterprises to investing small enterprises and thereby expansion f t h e s e u n i t s. Similarly, technology upgradation fund of SIDBI needs to be strengthened. The scope of credit linked capital subsidy scheme should be enhanced to cover a wide spectrum of products, sub-sectors and technologies. Seventh, over

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the period, it has been observed that small units that are linked to large corporates as suppliers, service providers, etc. are usually successful. It is relatively easier for the banks and financial institutions to finance various requirements including working capital, technologyupgradation, etc. of these units. Promotions of clusters linked to large units, thus, could help expansion of credits to small units. Finally, it has been observed that one of the major reasons for delays in sanction and is bursal of loans is the lengthy documentation and legal procedures involved in the process. While the large industries can afford to hire specialists for the job, the small scale entrepreneurs are often ill-equipped to handle this job on their own. It will greatly help SMEs if facilitation services are provided by various promotional agencies like SISIs, DICs, SIDCs, industry associations, banks, etc. The evaluation of various applications should also take place in a time bound manner and a stand should be taken within a stipulated time period. In case the application is rejected, the bank must apprise the applicant of the reasons for not granting the loan. For the benefit of SMEs, which through improved efficiency have managed to reduce the stock, the banks should give consideration to other factors for computing the maximum permissible bank finance.

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CHAPTER: 4 HSBC BANK

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4.1. OVERVIEW OF HSBC BANK:
The Hongkong and Shanghai Banking Corporation Limited is a prominent bank established and based in Hong Kong since 1865 when Hong Kong was a colony of the British Empire. It is the founding member of the HSBC Group and since 1990 is now a wholly owned subsidiary of HSBC Holdings plc. The company's business ranges from the traditional High Street roles of personal finance and commercial banking, to corporate and investment banking, private banking and global banking. It is the largest bank in Hong Kong with branches and offices throughout the Asia Pacific region including other countries around the world. HSBC is one of the oldest banking groups in the modern world. The bank is known locally simply as "The Bank", "Hongkong Bank" and "Lion Bank".

4.2. HSBC BANK IN INDIA:
HSBC's origins in India date back to 1853, when the Mercantile Bank of India was established in Mumbai. The Bank has since, steadily grown in reach and service offerings, keeping pace with the evolving banking and financial needs of its customers. In India, the Bank offers a comprehensive suite of world-class products and services to its corporate and commercial banking clients as also to a fast growing personal banking customer base.

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4.3. HSBC GROUPS ENTITIES:
1. Commercial Banking

a. Personal Banking HSBC offers a wide range of personal financial services, including personal lending and deposit products, through its branch network in Ahmedabad, Bangalore, Chennai, Chandigarh, Coimbatore, Gurgaon, Hyderabad, Jaipur, Kochi, Kolkata, Ludhiana, Mumbai, New Delhi, Noida, Pune, Thane, Trivandrum and Visakhapatnam. Also offered branch-wide are international Gold and Classic credit cards from VISA and MasterCard and debit cards from Visa. Customers have access to 24-hour banking services through an extensive network of automated teller machines (ATMs), an integrated Call Centre, and internet banking online@hsbc.

b.Non Resident Indian Banking HSBC's Non Resident Indian Banking (NRI) centres located in Asia-Pacific, the Middle East, Europe and North America, together with HSBC's offices worldwide, provide the international Indian Diaspora access to a range of products and services. These include NRI related investment (both international and domestic), transactional and deposit products, together with a full range of personal and private banking products in India and overseas. Internet banking also provides easy access to HSBC's services.

c. Financial Planning Services Services include investment and custodian management and access to stock broking and insurance services, which are offered to resident as well as non-resident Indians.

d. Corporate Banking HSBC has well-established, long-term corporate banking relationships with large domestic Indian corporations and foreign multinationals operating in India. Services include term and working capital finance, trade facilities, corporate deposits, syndications, payments and cash management services and factoring.

e. Business Banking HSBC's Extra Mile Business Banking offers two types of account to small and medium-sized

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businesses - The Business Account and the BusinessVantage Account. Services include Business Phone Banking, Business Doorstep Banking and Multi Branch Business Banking.

f. Payments and Cash Management HSBC provides integrated domestic and regional transaction support to corporate clients through a sophisticated range of cash management solutions, including collection and payment services and integration with customer back-end systems. Operations and client services are ISO 9001 certified. Hexagon, the HSBC Group's dedicated electronic banking service allows users to perform financial transactions, obtain international financial markets information, and review details of their domestic and international accounts, from anywhere in the world, 24 hours a day.

g. Trade (international and domestic) and Factoring Services A wide range of solutions tailored to meet customer's requirements for both domestic and international businesses is offered. HSBC is also one of the leading banks involved in the bullion business through its offices in Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi and is supported by the Group's global expertise in the precious metal business. HSBC is the leading provider of trade services in India and its trade centres are ISO 9002 certified.

h. Institutional Banking Working closely with Group offices in India and overseas, trade services, payments and cash management, treasury and capital markets, custody and clearing, and correspondent and electronic banking activities are offered to banks, financial institutions, securities houses, insurance companies, asset management companies and other non-banking companies, nongovernment and development organisations operating in India.

i. Treasury and Capital Markets Clients consistently rate HSBC's Treasury business as one of the best in India. Its dealing room in Mumbai is one of the largest in the country, serving clients in Mumbai and in the major metropolitan centres across the country. It provides a comprehensive range of products which include - foreign exchange, money market and fixed income products and derivatives

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in both rupees and major currencies.

j. Custody and Clearing The leading custodian in Asia, HSBC's custody and clearing services are available in 28 markets in Asia-Pacific and the Middle East. With experienced staff and the latest technology, HSBC is the premier provider of sub-custodian and clearing services to foreign institutional investors (FIIs) in India. HSBC clients include the domestic fund management sector in both the retail and institutional segments. Institutional Fund Services launched by the bank offers a comprehensive suite of products to domestic mutual funds and insurance companies ranging from custody, fund administration services, unit distribution and Cash Management Services.

2. Technology
 The HSBC Group develops and applies advanced technology to the efficient and convenient delivery of banking and related financial services. In India, the Group provides:  Self-Service Banking with over 150 in-branch and off-branch ATMs and 24-hour Phone Banking.  Trade and Corporate Banking services with real-time access to a centralised information database    Instantaneous inter-city transactions through online connections between all branches A state-of-the-art treasury dealing system A sophisticated card system supporting debit and credit cards, domestic and international VISA, MasterCard, and co-branded cards   A dedicated acquiring system for both MasterCard and Visa transactions online@hsbc, HSBC's internet banking service, provides customers with an integrated and secure platform to access their accounts.  Internet Payment Gateway handles credit card transactions on the internet.

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3. Asset Management
HSBC Asset Management (India) Private Limited provides a comprehensive range of investment management solutions to a diverse client base and is committed for aiming to deliver consistent investment performance, world-class service and a broad range of solutions for all types of investors. Our range of offerings in India comes under two broad categories Mutual Fund and Portfolio Management Services. Visit www.assetmanagement.hsbc.com/infor more info.

4. HSBC Global Resourcing
HSBC Global Resourcing is the largest, captive, banking and financial services off shoring organization in the world. A vital part of the HSBC Group's global strategy, Global Resourcing plays a key role in delivering shareholder value and seamlessly integrates and helps the Group remain competitive in the ever changing world of banking and finance. Global Resourcing is present in India as HSBC Electronic Data Processing India Pvt. Ltd., and operates out of 7 Group Service Centres (GSC) in Hyderabad, Bangalore, Kolkata, and Vishakhapatnam. Visit www.hsbcglobalresourcing.com for more info.

5. Insurance
HSBC Insurance Brokers (India) Private Limited is licensed by the Insurance Regulatory Development Authority (IRDA) to operate as a composite insurance broking company, which will function as a direct and a reinsurance broker.

6. Data Processing
HSBC Operations and Processing Enterprise (India) Private Limited, through two centres in Mumbai and Chennai, provides operational processing services for HSBC offices in India.

4.4. INTORDUCTION OF HSBC FACTORING:
The global presence of HSBC Group enables us to cooperate on a daily basis with thousands of companies around the world. The ability to respond in the best possible way to your company needs for timely and constant liquidity is a challenge and we are operating towards the creation of the conditions for

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steady growth.

4.5. Basic

service characteristics:

Through its factoring - Receivables Finance service, HSBC can provide you with a flexible receivables finance solution. Moreover, HSBC can undertake, on your behalf, the credit collection of claims that derive from the sale of goods or the supply of services. Therefore, you can focus on your business plans and take advantage of the rising market opportunities whilst improving the competitiveness of your company. The assessment of your customers' creditworthiness and the protection from potential credit risk you may be experiencing, are tasks that HSBC can undertake on your behalf. More specifically: Factoring - Receivables Finance Services at Domestic level

Finance Extension in the process of collecting your claims, creates a serious obstacle to the liquidity of your business. HSBC helps you overcome this obstacle by promptly giving you a predefined percentage of your claims value. You only need to inform HSBC on the details of the payable invoices. Credit Management Service Credit management and effective control of claims takes time, human and financial resources which you could use more productively in other areas. In order to concentrate on your business plans, we can provide you with a proficient and experienced executive team that takes over your direct credit management needs. Credit Protection Service A flexible and secure proposition, which among others ensures your commercial transactions. This means that if any client of yours exhibits signs of late or non payments, HSBC Factoring- Receivables Finance service can assume your compensation. The above service can be used in conjunction with finance and credit management services.

4.6. Factoring - Receivables Finance Service at International level Even for you, who run a company planning to do business beyond Greece or already doing business with international companies, HSBC Factoring - Receivables Finance Service is an ideal solution. Domestically or internationally, you will be offered the same level of services and advantages that support all your business plans, through an international network of agents that has the expertise to support your business. 4.7. IIF- Internet Invoice Finance Through the e- factoring service (IIF - Internet Invoice Finance), you have the opportunity to
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be informed immediately, anytime on the current status of your accounts, as well as of your transactions with your debtors. You can retrieve fast and safe all the information you need. Let us introduce you to HSBC factoring services and welcome you to a new highly reciprocal relationship. IIF - Internet Invoice Finance

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CHAPTER:5 CONCLUSION

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We can conclude that factoring services is also a new innovative way from which we can do our business and earn profit. In the Indian context, factoring is being viewed as a source of short-term finance. The estimated aggregate potential demand for factoring (finance). There seems to be a tendency to view factoring primarily as a financing function - a source of funds to fill the void of bank financing of receivables for small-scale industries and others. In launching factoring service, the thrust should be in the twin areas of receivables management, and credit appraisal; factoring agencies should be viewed as vehicles of development of these skills. Since the small-scale sector lacks these sophisticated skills, factors should be able to fill the gap. Giving priority to financing function would be self-defeating as receivable management would be given the back-seat. It is for the factors to generate the surpluses to mop up the additional resources and then embark on financing function. However, for policy reasons, should these go hand in hand, then the accent should be on receivable management otherwise, these agencies would end up as financing bodies. From the firm‟s point of view, factoring arrangements offer certain financial benefits in the form of savings in collection costs, reduction in bad debt losses, and reduction in interest cost of investment in receivables. On the other hand, the firm incurs certain costs, in the form of commissions and interest on advances. Therefore, to assess the financial desirability of factoring as an alternative to in-house management of receivables, the firm must assess the net benefit of this option, using the profit criterion approach. The factors have to establish their credibility in offering better management of receivables and financing at competitive rates to the clients.

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CHAPTER 6 BIBLOGRAPHY

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 From the Internet:www.hsbc.in www.google.com www.wikipedia.com www.scribd.com www.managementparadise.com  From the Book:Bharati. V. Pathak, The Indian Financial System, Pearson Publication

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