Financial services

1. FINANCIAL SERVICES
AJITH BIJU
Asst. Professor of Commerce
Co-operative School of Law Thodupuzha

2. WELCOME

3. FACTORING
• Factoring involves an outright sale of the receivables
of a firm to a financial institution called factor which
specialise in the management of trade credit.
• Factoring means direct selling of accounts
receivables of firm to an agent called factor
• Factor assumes the credit risk associated with the
collection of accounts
• For his services factor charges a commission usually
on the value of receivables received . It is called
factorage

4. DEFINITION
Factoring may be defined as the
relationship, created by an agreement
between the seller of goods (client) and
financial institution called the factor,
where by the factor purchases the
receivables of the client and also controls
and administers the receivables

5. Functions of a factor
■ Credit recording - Maintenance of debtors ledger,
collection schedules, Discount allowed etc.
■ Credit administration - Collecting the book debts
■ Credit protection –The factor eliminates risk of loss
of the client
■ Credit financing - factor advances a proportion of
the value of book debts of the clients
■ Finance and business information - factor advises
the client on the prevailing business trend
■ Advisory services – Factor provides some advisory
services
■ Administration of sellers sales ledger

6. FEATURES / PROCESS OF FACTORING
 Selection of accounts
 Collection of accounts
 Recourse on bad debts
 Payments to the firm
 Advances against receivables
 Factor commission

7. Mode of operation of factoring

8. ■ Factor and client (seller) enters into an agreement.
■ Factor evaluates the creditworthiness of the client
■ Client sells goods/services.
■ Client assigns the debt in favour of the factor, Client
notifies on the invoice a direction to the customer to pay
the invoice value to the factor.
■ Client forwards invoice copy to factor.
■ Factor provides credit to the client, to the extent of 80%
the invoice value
■ Factor periodically make follow up with the customer.
■ When the customer pays the amount of the invoice the
balance of 20% of the invoice value is passed to the client
recovering necessary interest and other charges.

9. TYPES OF FACTORING
• Recourse and Non-Recourse Factoring
• Advance Factoring and Maturity Factoring
• Bank Participation Factoring
• Confidential Factoring (Undisclosed
factoring)
• Supplier guarantee factoring
• International Factoring (Export factoring)

10. •Conventional or Full factoring
• Limited Factoring
•Disclosed Factoring
• Selected seller/Buyer based Factoring
•Domestic Factoring
• Agency Factoring

11. THANK YOU