Factoring is a financial service that allows companies to sell their receivables or invoices to a third party at a discount. This provides immediate working capital to the company to use for ongoing operations or future production. There are various types of factoring arrangements like recourse, non-recourse, domestic and international factoring. While factoring provides benefits like accelerated cash flow and reduced bad debts, it also carries some risks like potential harm to customer relationships or losses if the factor behaves poorly towards customers.

2. FACTORING

3.  Factoring may be defined as:- selling the
receivables of a firm at discount to a financial
organisation (factor).
The cash from the sale of the receivables
provides finance to selling company (client).
 In simple words :- Company sells receivables
to factor who provide services to clients &
provide advance to clients for future
production and factor charge commission for
collection of receivables.

4.  The Word Factor Derived From Latin Word “Facree”. It Means “
To Make Or To Get Things Done”.
 Factoring Services was First started in USA “United States Of
America” In The Year “1920”. And other rest part of worlds
Introduced In The year “1960’s”.
 According to years ago Factoring Services Have Become Quite
popular All Over The World.
 The Scenairo was something like that the “900” companies
providing “Factoring services” In More Than “50” Countries.

5.  According to V.A. AVADHANI:-
“ Factoring is a service of
financial nature involving the conversion of credit bills
into cash”.

6. *Buyers Of Goods (i.e Customer):-
Purchase goods on credit and
pay off when credit period is over.
*Seller Of Goods (i.e Client):-
Supplied goods Provided to
customers on credit terms.
*Factor (i.e Agent) :-
Who purchase invoice
(receivables) from seller of goods and collect
money from customers at maturity & provide
advance to clients.

7.  To receive from the trouble of collecting
receviables.
 Minimize the risk of Bad Debts.
 Better credit control policy.
 Working Capital requirements.
 Market information.

8.  Conversion of credit bills into cash.
 Purchase of credit bills & collect Receiveables.
 Risk associated.
 Financial intermediary between “Buyer & seller”.
 Handling Collection in efficient manner.
 Advisory to clients.
 Protection from ‘Bad Debts’.
 Solve Problems relating to receviables & delays &
defaults of credit.
 Responsible to make sales accounts , debt
collection ,etc.
 Credit monitoring by factor.

9.  Provide 80% to 90% Finance against
receviables.
 Collect Cash against Receviables.
 Furnish reports to client.
 Sales ledger administration ( accounting
work).
 Non- Recourse Factoring.
 Provides information (sales analysis, overdue,
marketing, finance ,etc).

11.  Acceleration of production cycle.
 Additional sources.
 Adequate credit period for customers.
 Advisory services.
 Competitive terms offer.
 Higher Credit Standing.
 Improves Efficiency.
 Reduce Cost.

12.  Over confidence.
 Chances of fraud.
 Lack of professionalism.
 Not suitable for small companies.
 Causes Delays.
 Affects image of client.
 Not suitable for one time sales.
 Increases the cost of finance.

13.  Lack of awareness.
 Banks better placed to offer such services.
 Availability of better options.
 Non availabilty of credit insurance.
 No notification from states with regard under
waiver stamp duty.
 No access to debt recovery platforms.
 Fake bills.
 Limited reach.

14.  Recourse Factoring.
 Non recourse Factoring.
 Maturity Factoring.
 Advance Factoring.
 Invoice Discounting.
 Domestic Factoring.
 Cross Border Factoring.
 Invoice Factoring.
 Full Factoring.
 Reverse Factoring.
 EDI Factoring.
 Disclosed Factoring.
 Un -disclosed Factoring.

16.  Factoring is a financial service covering the
financing of accounts receivables in domestic
as well as in international trade.
 International factoring is a service which
helps the exporter and importer to trade on
account.
 The client can choose any type of
international factoring depend upon exporter
clients needs and his price bearing capacity.

17.  Single / Direct Factoring System.
 Direct Export Factoring.
 Direct Importing Factoring.
 Back- to- Back Factoring.

18.  Company image distortion.
 Constraints.
 Cost.
 Insurance.
 Losses.
 Possible harm to customers.

19. Hence ,We conculde that Factoring is a Helpful
Service For Financing a Business till Buyer
provides Money to the Seller, but sometimes it
Creates Company Distortion or losses due to
the Factor Behaviour towards Customers.