Factoring is a financial transaction where a business sells its accounts receivable to a third party at a discount. It converts non-liquid assets like receivables into cash, providing immediate cash flow to meet business needs. Factors provide services like sales ledger administration, credit management, debt collection, and financial advances secured against receivables. Costs include commission and interest, but benefits include improved cash flow, extended payment terms, quick funding, and easy qualification requirements.

2. MEANING
 Factoring is a source of meeting the present and
immediate cash needs of the organization.
 Factoring is a financial transaction and a type of
debtor finance in which a business sells its accounts
receivable to a third party a discount.
 It is also known as invoice factoring or account receivable
factoring.
 Factoring coverts a non productive, inactive asset
(receivables) into a productive asset (cash).

3.  The client can obtain the cash immediately or from time to
time as and when requirement of cash arises.
 Factoring is offered in two ways:
1. with recourse to the drawer(s)
2. without recourse to the drawer(s)

4. NATURE OF FACTORING
 A financial institution that rendering services pertaining
to the management and financing of sundry debtors is
referred to as a Factor.
 SBI Factors and Commission ltd., Siemens Factoring
private Ltd., Canbank Factors Ltd.
 The factor provides three basic services:
1. Sales ledger administration and credit management.
2. Credit collection and protection against default and bad
debt losses.
3. Financial accommodation against the assigned book
debts.

5.  Cost involved in factoring:
1. The factoring commission or service fees.
2. The interest on advance granted by the factor.
 Benefits of factoring:
1. Improved cash flow
2. Extend payment terms with confidence.
3. Quick funding
4. Easy qualification requirement.