This slide include Factoring service Meaning, Types and Charges

1. FACTORING
SERVICES
MEANING
TYPES
CHARGES

2. What is Factoring?
• Factoring is a financial transaction and a type of debtor finance in
which a business sells its accounts receivable (i.e., invoices) to a third
party (called a factor) at a discount. A business will sometimes factor
its receivable assets to meet its present and immediate cash needs

3. TYPES OF FACTORING
RECOURSE
FACTORING
NON-RECOURSE
FCTORING
MATURITY
FACTORING
CROSS-BORDER
FACTORING
INTERNATIONAL
FACTORING

4. RECOURSE
FACTORING
• Up to 75% to 85% of Invoice Receivable is
factored.
• Interest is charged from the date of advance to
the date of collection.
• Factor purchase Receivable on the condition
that loss arising on account of non-recovery will
borne by the Client.
• Credit Risk is with the Client.
• Factor does not participate in the credit
sanction process.
• In India, factoring is done with recourse.

5. NON-RECOURSE FACTORING
• Factor purchases Receivable on the condition that the Factor has no recourse to the Client, If the
debt turns out to be non-recoverable.
• Credit risk is with the Factor.
• Higher commission is charged.
• Factor participates in credit sanction process and approves credit limit given by the Client to the
Customer.
• In USA/UK factoring done without recourse.

6. MATURITY FACTORING
• Factor does not make any advance payment to the Client.
• Pays on guaranteed payment date or on Collection Receivables.
• Guaranteed payment date is usually fixed taking into account previous collection
experiences of the Client.
• Nominal Commission is charged.
• No risk to Factor.

7. CROSS-BORDER FACTORING
• It is similar to domestic factoring except that there are four parties
A) Exporter
B) Export Factor
C) Import Factor
D) Importer
• It is also called Two-factor system of factoring.
• Where foreign currency is involved, Factor covers exchange risk also.

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