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    This document discusses factoring, which refers to an arrangement where a financial institution assumes credit and collection functions for a client by purchasing their receivables. It describes the key characteristics of factoring as well as the different types, including domestic, export, cross-border, full-service, and collection factoring. The advantages of factoring are also outlined, such as cost savings, liquidity, and cash flow benefits. Potential disadvantages involve issues with management efficiency or redundancy if a firm already has a nationwide branch network. The document concludes by covering RBI guidelines for factoring operations.

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    This document discusses factoring, which refers to an arrangement where a financial institution assumes credit and collection functions for a client by purchasing their receivables. It describes the key characteristics of factoring as well as the different types, including domestic, export, cross-border, full-service, and collection factoring. The advantages of factoring are also outlined, such as cost savings, liquidity, and cash flow benefits. Potential disadvantages involve issues with management efficiency or redundancy if a firm already has a nationwide branch network. The document concludes by covering RBI guidelines for factoring operations.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    15 views10 pages

    Finacial Management

    Uploaded by

    Revanth s
    This document discusses factoring, which refers to an arrangement where a financial institution assumes credit and collection functions for a client by purchasing their receivables. It describes the key characteristics of factoring as well as the different types, including domestic, export, cross-border, full-service, and collection factoring. The advantages of factoring are also outlined, such as cost savings, liquidity, and cash flow benefits. Potential disadvantages involve issues with management efficiency or redundancy if a firm already has a nationwide branch network. The document concludes by covering RBI guidelines for factoring operations.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    of 10

    FACTORING

    Presented by-
    Revanth s
    USN:1DA18MBA40
    FACTORING

    Meaning-
    According to cs kalayansundam “continuing
    arrangement under which a financial institution assumes
    the credit and collection functions for its client,
    purchases receivables as they araise,maintain the sales
    ledger, attends to other book-keeping duties relating to
    such accounts.
    Characteristics

    • The nature
    • The form
    • The assignment
    • Fiduciary position
    • Professionalism
    • Credit realization
    • Less dependence
    Types of factoring.
    1. Domestic factoring
    Factoring that arises from transactions relating to
    domestic sales. factoring may be of three types:

    a) Disclosed factoring
    b) Undisclosed factoring
    c) Discount factoring
    2. Export factoring
    When the claims of the exporter are assigned to the
    banker or any financial institutions, and financial
    assistance is obtain on the strength of export documents
    and guaranteed payments is called export factoring.
    3.Cross border factoring
    It involves the claims of an expoter which are assigned
    to a banker or any financial institutions in the importer.
    3. Full –service factoring.
    It also know as old-line factoring, is a type of factoring
    where by the factor has no recourse to the seller in the
    event of the failure of the buyer to make prompt
    payment of their dues to the factor, which might result
    from financial inability of the buyer.
    4. Collection factoring.
    The factor makes no advancement of finance to the
    client. The factor makes payment either on guarnteed
    payment date.
    Advantages of factoring

    • Cost saving
    • Leverages
    • Liquidity
    • Cash flow
    • Infrastructure
    Dis-advantages
    o Engaging in a factor may be reflective of the
    inefficiency of the management of the firm
    receivables.
    o Factoring may be redundant if a firm maintains a
    nation –wide network of branches.
    o Difficulties arising from the financial evolution of
    clients.
    factoring-players
    • The buyer.
    • The seller.
    • The factor.
    RBI Guidelines for factoring

    • Prior approval
    • Subsidiaries
    • Exclusive business
    • Investment limit
    • RBI clearance
    • reporting
    Thank you

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