The document provides information on various financial services like factoring, leasing, merchant banking, and mutual funds. It defines factoring as the selling of invoices or receivables to a third party for cash, explains the key steps in factoring, and discusses the types and costs/benefits. It defines leasing and distinguishes operating vs financial leases. It defines merchant banking as providing various financial services and outlines their roles. It defines mutual funds as a pool of money from investors that is invested in securities according to the fund's objectives.
This document provides information on factoring and forfaiting. It defines factoring as the purchase of accounts receivables by a factoring company, which provides financing, debt collection services, and protects against bad debts. Forfaiting involves the outright sale of receivables to a forfaiter at a discounted price without recourse to the seller. The key differences between the two are that factoring is for ongoing arrangements, provides various services, and has no minimum transaction size, while forfaiting is for single transactions over $250k and only provides financing without recourse.
The document discusses various types of financial services. It begins by defining financial services as services provided by the finance industry, including banks, credit card companies, insurance companies, brokerages, and government enterprises. It then describes several types of fundamental financial services like leasing, underwriting, consumer credit, hire purchase, factoring, forfaiting, bill discounting, housing finance, and venture capital financing. The document also distinguishes between fund-based services, which involve raising and investing funds, and fee-based services, which generate income through fees from services like issue management, advisory, credit ratings, mutual funds, and stock broking. It provides details on selected services like stock broking, credit ratings, and CR
Factoring is the sale of accounts receivable (book debts) by a firm to a financial institution called a factor. The factor provides upfront cash payment for the receivables, usually 80%, and assumes responsibility for collecting payment from customers and managing credit risk. Factoring provides firms with working capital and credit protection. It involves three main parties - the client firm, its customers, and the financial institution factor. Factoring has grown in importance globally as a source of trade financing and working capital for businesses.
This document provides an overview of factoring and forfaiting. It defines factoring as the financial transaction where a business sells its accounts receivable to a third party called a factor at a discount. Forfaiting refers to the financing of receivables related to international trade where the right to export receivables is purchased by a financial intermediary without recourse. The document outlines the key parties involved in factoring and forfaiting, the different types of factoring arrangements, the functions of a factor, and the information and documents required by a forfaiter.
The document provides information about factoring and HSBC's factoring services. It defines factoring as the financial transaction where a business sells its accounts receivable to a third party called a factor. It then discusses the key parties and processes involved in factoring transactions, as well as the types of factoring services offered by HSBC, including domestic and international factoring. HSBC aims to be an active partner in managing customers' supply chains and receivables through these factoring products.
ICICI Bank provides factoring services to improve customers' cash flow and credit rating by taking over receivables collection. Factoring allows customers to access working capital by selling their receivables to the bank at a discount. ICICI Bank offers both domestic and export factoring services as well as import and export financing through letters of credit, trade credit, and bill discounting. The bank aims to meet all trade financing needs with competitive rates and a large international correspondent bank network.
Factoring is a financial transaction where a business sells its accounts receivable to a third party at a discount in exchange for immediate cash. There are various types of factoring, including recourse factoring, where the client refunds amounts for defaults, and non-recourse factoring, where the factor's obligation is absolute. Factoring provides businesses with immediate cash flow and transfers the credit risk to the factoring institution. However, it is a relatively expensive source of financing.
Financial services are economic services provided by the finance industry, which encompasses organizations that deal with money management like banks, credit card companies, insurance companies, stock brokerages, and investment funds. Financial services include banking services like checking accounts and loans, investment services like asset and fund management, and insurance products. They can be formal through institutions or informal through personal networks and are important for fund raising, investment, economic growth, and more.
This document provides information on factoring and forfaiting. It defines factoring as the purchase of accounts receivables by a factoring company, which provides financing, debt collection services, and protects against bad debts. Forfaiting involves the outright sale of receivables to a forfaiter at a discounted price without recourse to the seller. The key differences between the two are that factoring is for ongoing arrangements, provides various services, and has no minimum transaction size, while forfaiting is for single transactions over $250k and only provides financing without recourse.
The document discusses various types of financial services. It begins by defining financial services as services provided by the finance industry, including banks, credit card companies, insurance companies, brokerages, and government enterprises. It then describes several types of fundamental financial services like leasing, underwriting, consumer credit, hire purchase, factoring, forfaiting, bill discounting, housing finance, and venture capital financing. The document also distinguishes between fund-based services, which involve raising and investing funds, and fee-based services, which generate income through fees from services like issue management, advisory, credit ratings, mutual funds, and stock broking. It provides details on selected services like stock broking, credit ratings, and CR
Factoring is the sale of accounts receivable (book debts) by a firm to a financial institution called a factor. The factor provides upfront cash payment for the receivables, usually 80%, and assumes responsibility for collecting payment from customers and managing credit risk. Factoring provides firms with working capital and credit protection. It involves three main parties - the client firm, its customers, and the financial institution factor. Factoring has grown in importance globally as a source of trade financing and working capital for businesses.
This document provides an overview of factoring and forfaiting. It defines factoring as the financial transaction where a business sells its accounts receivable to a third party called a factor at a discount. Forfaiting refers to the financing of receivables related to international trade where the right to export receivables is purchased by a financial intermediary without recourse. The document outlines the key parties involved in factoring and forfaiting, the different types of factoring arrangements, the functions of a factor, and the information and documents required by a forfaiter.
The document provides information about factoring and HSBC's factoring services. It defines factoring as the financial transaction where a business sells its accounts receivable to a third party called a factor. It then discusses the key parties and processes involved in factoring transactions, as well as the types of factoring services offered by HSBC, including domestic and international factoring. HSBC aims to be an active partner in managing customers' supply chains and receivables through these factoring products.
ICICI Bank provides factoring services to improve customers' cash flow and credit rating by taking over receivables collection. Factoring allows customers to access working capital by selling their receivables to the bank at a discount. ICICI Bank offers both domestic and export factoring services as well as import and export financing through letters of credit, trade credit, and bill discounting. The bank aims to meet all trade financing needs with competitive rates and a large international correspondent bank network.
Factoring is a financial transaction where a business sells its accounts receivable to a third party at a discount in exchange for immediate cash. There are various types of factoring, including recourse factoring, where the client refunds amounts for defaults, and non-recourse factoring, where the factor's obligation is absolute. Factoring provides businesses with immediate cash flow and transfers the credit risk to the factoring institution. However, it is a relatively expensive source of financing.
Financial services are economic services provided by the finance industry, which encompasses organizations that deal with money management like banks, credit card companies, insurance companies, stock brokerages, and investment funds. Financial services include banking services like checking accounts and loans, investment services like asset and fund management, and insurance products. They can be formal through institutions or informal through personal networks and are important for fund raising, investment, economic growth, and more.
Financial services refer to products offered by financial institutions like banks, insurance companies, and mutual funds. These include loans, credit cards, investments, and stock trading. Financial services have key characteristics of intermediating funds, intangibility, and perishability. Main functions include facilitating transactions, mobilizing savings, allocating capital, and meeting financial needs. There are various types of financial services based on consumers (individual or business), fund utilization (lending or non-lending activities), geography, and other features. Mutual funds are a form of financial service that pools investor money to invest in securities under different schemes.
This document provides an overview of fund-based financial services. It discusses six main types of fund-based services: 1) leasing, 2) hire purchase, 3) consumer credit, 4) factoring, 5) venture capital financing, and 6) housing finance. For each type, it provides definitions, key features, and advantages. The overall purpose is to classify and explain different methods of providing structured financing that is secured or supported by company assets.
The document discusses the roles and responsibilities of merchant bankers in India according to SEBI regulations. Key points:
- Merchant bankers are regulated by SEBI and involved in public issues, rights issues, open offers, and buybacks.
- They must meet requirements for capital, staffing, experience, and qualifications.
- As lead managers, they perform key functions like pricing issues, marketing, and preparing offer documents.
- Post-issue, they monitor allotments and refunds, file reports, and ensure investor grievances are addressed.
This document provides an overview of merchant banking services. It defines merchant banking and traces its origins in London financing foreign trade. Merchant banking services include project counseling, loan syndication, issue management, underwriting public issues, portfolio management, advising on NRI investment, mergers and acquisitions, and offshore finance. They help raise funds for projects, market corporate securities to the public, insure companies issuing public stock, manage investor portfolios, and facilitate foreign investment.
This document discusses various types of financial services including leasing, hire purchase, and venture capital. It provides details on:
- The process of leasing, including the steps and types (finance lease, operating lease, sale and leaseback).
- How hire purchase works, including terms, process, and features.
- The meaning of venture capital, how it provides funding to startups and small businesses, and characteristics like long time horizon and equity participation.
- The development of venture capital in India, including the first VCFs established and rules/regulations from SEBI and the Indian Venture Capital and Private Equity Association.
The document discusses factoring and forfaiting. It provides details on:
1) Factoring involves the sale of book debts or invoices by a firm to a financial institution for an immediate payment, with the factor taking on responsibility for collection.
2) Forfaiting deals specifically with receivables related to deferred payment exports, where the exporter's rights are purchased without recourse.
3) Both mechanisms provide liquidity to exporters and absorb risks like political or conversion risks associated with cross-border receivables.
Bill discounting allows sellers to receive immediate payment from banks or non-bank financial companies by discounting bills of exchange they receive from buyers. The seller presents the bill of exchange along with supporting documents to the discounting entity and receives immediate payment at a discounted rate. This provides sellers with liquidity before the bill reaches maturity. Common types of bills include demand bills, usance bills, documentary bills, and clean bills. Discounters assess creditworthiness and only discount bills that are backed by genuine trade transactions to avoid fraudulent practices like kite flying.
Factoring, receivables factoring or debtor financing, is when a company buys a debt or invoice from another company. Factoring is also seen as a form of invoice discounting in many markets and is very similar but just within a different context.
The document discusses various topics related to financial services including bill discounting, asset liability management, factoring, forfaiting, Basel accords, and the SARFAESI Act. It defines each topic and provides key details about them in 1-3 paragraphs. Bill discounting involves trading bills of exchange prior to maturity for a discounted value. Asset liability management matches a company's assets and cash flows with its obligations. Factoring involves a business selling its accounts receivables to a third party for cash. Forfaiting enables exporters to receive immediate cash by selling medium-long term receivables. The Basel accords provide international banking regulations on capital adequacy. The SARFAESI Act allows banks to
Securitization involves issuing marketable securities backed by expected cash flows from assets like loans. In a typical securitization process, an originator sells assets like loans to a special purpose vehicle (SPV). The SPV issues securities to investors backed by the cash flows from the underlying assets. Various parties are involved including originators, obligors, collection agents, credit enhancers, arrangers, and rating agencies. Securitization provides benefits like more efficient financing, improved balance sheets, and better risk management for originators. Mortgage loans and other predictable cash flow assets can be securitized. A robust financial infrastructure is required to support successful securitization.
The document discusses the post-issue activities of a merchant banker. There are two main post-issue activities: post-issue monitoring reports and redressal of investor grievances. As part of post-issue monitoring, the merchant banker must ensure submission of monitoring reports and a due diligence certificate to the regulatory body. They must also actively work to resolve any investor complaints regarding allotment or refunds. The merchant banker is responsible for coordinating with other intermediaries and ensuring issues are fully subscribed before closing. They must provide information on underwriters who do not meet commitments and ensure funds are kept separately as required.
This document discusses factoring, which is a financial transaction where a business sells its accounts receivable to a third party called a factor in exchange for immediate cash. There are several types of factoring described, including domestic, international, recourse, non-recourse, maturity, and invoice factoring. The key differences between factoring and a bank loan are also outlined. A case study is then provided showing how a company used export factoring and purchase order financing to fulfill several contracts requiring upfront capital.
This document provides an overview of finance and key concepts. It discusses what finance is, the functions and areas of finance, and compares finance to accounting. It also outlines the goals of business as maximizing shareholder wealth. The document reviews types of businesses including sole proprietorships, partnerships, and companies. It then discusses the modern corporation's separation of owners and managers. Finally, it provides a brief tour of the financial environment, including financial markets, flows of funds, types of markets, and influences on expected security returns such as risk.
This document provides an overview of factoring and forfaiting processes used in international trade finance. It discusses that factoring involves the sale of book debts or invoices by an exporter to a factor, who provides financing and collects payment. Forfaiting involves the purchase of export receivables by a financial intermediary without recourse to the exporter. The key differences are that factoring may involve credit risk transfer, while forfaiting is done on a non-recourse basis. Both tools help companies raise working capital by discounting outstanding receivables. The document outlines the various parties, documents, costs and applicable regulations for these financial services.
Corporate Banking is responsible for managing relationships with major corporate and institutional clients by delivering a comprehensive range of financial products and services. This involves working closely with specialists across treasury, capital markets, transaction banking, and other areas. Corporate Banking is also responsible for originating and managing credit and lending products.
Financial services refer to services provided by the finance industry, such as banking, insurance, investment funds, and more. There are two main types of financial services - fund or asset based services, which involve raising and investing funds, and fee based services, where companies earn income through fees. Fund based services include leasing, housing finance, credit cards, venture capital, factoring, forfeiting, and bill discounting. Fee based services involve activities like issue management, corporate advisory, credit ratings, mutual funds, and stock broking.
Financial services refer to the services provided by the finance market such as banking, insurance, investment funds, payment processing, housing financing, stock broking, and investment banking. Financial services have a scope that broadly includes traditional activities like fund-based activities such as underwriting shares and bonds, and non-fund based activities such as managing capital issues. Modern financial service activities include advisory services, mergers and acquisitions planning, and corporate restructuring guidance. Financial regulation subjects financial institutions to requirements and guidelines to maintain the integrity of the financial system and influence the structure of banking sectors.
Factoring is a financial transaction where a business sells its accounts receivable to a third party called a factor in exchange for immediate cash. This differs from a bank loan in that factoring emphasizes the receivable's value rather than the firm's creditworthiness, it is a purchase of assets rather than a loan, and involves three parties rather than two. The three parties are the seller of the receivable, the debtor, and the factor. Factoring transfers ownership of the receivables to the factor, giving them the right to collect payment from debtors and bear the risk of nonpayment.
Factoring is a financial transaction where a business sells its accounts receivable to a third party called a factor in exchange for immediate cash. This differs from a bank loan in that factoring emphasizes the receivable's value rather than the firm's creditworthiness, it is a purchase of an asset rather than a loan, and it involves three parties rather than two. The three parties are the seller of the receivable, the debtor, and the factor. Factoring allows a business to access cash from its outstanding invoices sooner than if it waited for the debtor to pay.
Financial services refer to products offered by financial institutions like banks, insurance companies, and mutual funds. These include loans, credit cards, investments, and stock trading. Financial services have key characteristics of intermediating funds, intangibility, and perishability. Main functions include facilitating transactions, mobilizing savings, allocating capital, and meeting financial needs. There are various types of financial services based on consumers (individual or business), fund utilization (lending or non-lending activities), geography, and other features. Mutual funds are a form of financial service that pools investor money to invest in securities under different schemes.
This document provides an overview of fund-based financial services. It discusses six main types of fund-based services: 1) leasing, 2) hire purchase, 3) consumer credit, 4) factoring, 5) venture capital financing, and 6) housing finance. For each type, it provides definitions, key features, and advantages. The overall purpose is to classify and explain different methods of providing structured financing that is secured or supported by company assets.
The document discusses the roles and responsibilities of merchant bankers in India according to SEBI regulations. Key points:
- Merchant bankers are regulated by SEBI and involved in public issues, rights issues, open offers, and buybacks.
- They must meet requirements for capital, staffing, experience, and qualifications.
- As lead managers, they perform key functions like pricing issues, marketing, and preparing offer documents.
- Post-issue, they monitor allotments and refunds, file reports, and ensure investor grievances are addressed.
This document provides an overview of merchant banking services. It defines merchant banking and traces its origins in London financing foreign trade. Merchant banking services include project counseling, loan syndication, issue management, underwriting public issues, portfolio management, advising on NRI investment, mergers and acquisitions, and offshore finance. They help raise funds for projects, market corporate securities to the public, insure companies issuing public stock, manage investor portfolios, and facilitate foreign investment.
This document discusses various types of financial services including leasing, hire purchase, and venture capital. It provides details on:
- The process of leasing, including the steps and types (finance lease, operating lease, sale and leaseback).
- How hire purchase works, including terms, process, and features.
- The meaning of venture capital, how it provides funding to startups and small businesses, and characteristics like long time horizon and equity participation.
- The development of venture capital in India, including the first VCFs established and rules/regulations from SEBI and the Indian Venture Capital and Private Equity Association.
The document discusses factoring and forfaiting. It provides details on:
1) Factoring involves the sale of book debts or invoices by a firm to a financial institution for an immediate payment, with the factor taking on responsibility for collection.
2) Forfaiting deals specifically with receivables related to deferred payment exports, where the exporter's rights are purchased without recourse.
3) Both mechanisms provide liquidity to exporters and absorb risks like political or conversion risks associated with cross-border receivables.
Bill discounting allows sellers to receive immediate payment from banks or non-bank financial companies by discounting bills of exchange they receive from buyers. The seller presents the bill of exchange along with supporting documents to the discounting entity and receives immediate payment at a discounted rate. This provides sellers with liquidity before the bill reaches maturity. Common types of bills include demand bills, usance bills, documentary bills, and clean bills. Discounters assess creditworthiness and only discount bills that are backed by genuine trade transactions to avoid fraudulent practices like kite flying.
Factoring, receivables factoring or debtor financing, is when a company buys a debt or invoice from another company. Factoring is also seen as a form of invoice discounting in many markets and is very similar but just within a different context.
The document discusses various topics related to financial services including bill discounting, asset liability management, factoring, forfaiting, Basel accords, and the SARFAESI Act. It defines each topic and provides key details about them in 1-3 paragraphs. Bill discounting involves trading bills of exchange prior to maturity for a discounted value. Asset liability management matches a company's assets and cash flows with its obligations. Factoring involves a business selling its accounts receivables to a third party for cash. Forfaiting enables exporters to receive immediate cash by selling medium-long term receivables. The Basel accords provide international banking regulations on capital adequacy. The SARFAESI Act allows banks to
Securitization involves issuing marketable securities backed by expected cash flows from assets like loans. In a typical securitization process, an originator sells assets like loans to a special purpose vehicle (SPV). The SPV issues securities to investors backed by the cash flows from the underlying assets. Various parties are involved including originators, obligors, collection agents, credit enhancers, arrangers, and rating agencies. Securitization provides benefits like more efficient financing, improved balance sheets, and better risk management for originators. Mortgage loans and other predictable cash flow assets can be securitized. A robust financial infrastructure is required to support successful securitization.
The document discusses the post-issue activities of a merchant banker. There are two main post-issue activities: post-issue monitoring reports and redressal of investor grievances. As part of post-issue monitoring, the merchant banker must ensure submission of monitoring reports and a due diligence certificate to the regulatory body. They must also actively work to resolve any investor complaints regarding allotment or refunds. The merchant banker is responsible for coordinating with other intermediaries and ensuring issues are fully subscribed before closing. They must provide information on underwriters who do not meet commitments and ensure funds are kept separately as required.
This document discusses factoring, which is a financial transaction where a business sells its accounts receivable to a third party called a factor in exchange for immediate cash. There are several types of factoring described, including domestic, international, recourse, non-recourse, maturity, and invoice factoring. The key differences between factoring and a bank loan are also outlined. A case study is then provided showing how a company used export factoring and purchase order financing to fulfill several contracts requiring upfront capital.
This document provides an overview of finance and key concepts. It discusses what finance is, the functions and areas of finance, and compares finance to accounting. It also outlines the goals of business as maximizing shareholder wealth. The document reviews types of businesses including sole proprietorships, partnerships, and companies. It then discusses the modern corporation's separation of owners and managers. Finally, it provides a brief tour of the financial environment, including financial markets, flows of funds, types of markets, and influences on expected security returns such as risk.
This document provides an overview of factoring and forfaiting processes used in international trade finance. It discusses that factoring involves the sale of book debts or invoices by an exporter to a factor, who provides financing and collects payment. Forfaiting involves the purchase of export receivables by a financial intermediary without recourse to the exporter. The key differences are that factoring may involve credit risk transfer, while forfaiting is done on a non-recourse basis. Both tools help companies raise working capital by discounting outstanding receivables. The document outlines the various parties, documents, costs and applicable regulations for these financial services.
Corporate Banking is responsible for managing relationships with major corporate and institutional clients by delivering a comprehensive range of financial products and services. This involves working closely with specialists across treasury, capital markets, transaction banking, and other areas. Corporate Banking is also responsible for originating and managing credit and lending products.
Financial services refer to services provided by the finance industry, such as banking, insurance, investment funds, and more. There are two main types of financial services - fund or asset based services, which involve raising and investing funds, and fee based services, where companies earn income through fees. Fund based services include leasing, housing finance, credit cards, venture capital, factoring, forfeiting, and bill discounting. Fee based services involve activities like issue management, corporate advisory, credit ratings, mutual funds, and stock broking.
Financial services refer to the services provided by the finance market such as banking, insurance, investment funds, payment processing, housing financing, stock broking, and investment banking. Financial services have a scope that broadly includes traditional activities like fund-based activities such as underwriting shares and bonds, and non-fund based activities such as managing capital issues. Modern financial service activities include advisory services, mergers and acquisitions planning, and corporate restructuring guidance. Financial regulation subjects financial institutions to requirements and guidelines to maintain the integrity of the financial system and influence the structure of banking sectors.
Factoring is a financial transaction where a business sells its accounts receivable to a third party called a factor in exchange for immediate cash. This differs from a bank loan in that factoring emphasizes the receivable's value rather than the firm's creditworthiness, it is a purchase of assets rather than a loan, and involves three parties rather than two. The three parties are the seller of the receivable, the debtor, and the factor. Factoring transfers ownership of the receivables to the factor, giving them the right to collect payment from debtors and bear the risk of nonpayment.
Factoring is a financial transaction where a business sells its accounts receivable to a third party called a factor in exchange for immediate cash. This differs from a bank loan in that factoring emphasizes the receivable's value rather than the firm's creditworthiness, it is a purchase of an asset rather than a loan, and it involves three parties rather than two. The three parties are the seller of the receivable, the debtor, and the factor. Factoring allows a business to access cash from its outstanding invoices sooner than if it waited for the debtor to pay.
Financial services refer to services provided by the finance industry, such as banks, credit card companies, insurance companies, brokerages, and investment funds. There are two main types of financial services - fund or asset-based services, and fee-based services. Fund-based services involve raising funds through deposits, debt, or equity and investing those funds by lending or purchasing securities. These include services like leasing, housing finance, credit cards, venture capital, factoring, forfeiting, and bill discounting. Fee-based services involve earning income through fees, commissions, or brokerage on services like issue management, advisory, credit ratings, mutual funds, securitization, and stock broking.
Financial services refer to services provided by the finance industry, such as banks, credit card companies, insurance companies, brokerages, and investment funds. There are two main types of financial services - fund or asset-based services, and fee-based services. Fund-based services involve raising funds through deposits, debt, or equity and investing those funds by lending or purchasing securities. These include services like leasing, housing finance, credit cards, venture capital, factoring, forfeiting, and bill discounting. Fee-based services involve earning income through fees, commissions, or brokerage on services like issue management, advisory, credit ratings, mutual funds, securitization, and stock broking.
VARIOUS FACILITIES TO EXPORTS AND IMPORTS INCLUDING FACTORING 2.pptxYajushArora1
This document discusses factoring and forfeiting as methods of providing financing to exporters and importers. It defines factoring as converting credit sales into cash by having a financial institution purchase a company's accounts receivable. Forfeiting involves an exporter relinquishing the right to receive payment from an importer in exchange for an upfront cash payment from a forfeiting institution. The document outlines the key characteristics, types, facilities, and documentary requirements of factoring and forfeiting transactions to provide international trade financing options to companies.
This document provides an overview of financial services. It begins by defining financial services as services provided by the finance industry, including banks, credit companies, insurance companies, brokerages, and investment funds.
The document then discusses various types of financial services such as banking services, investment services, insurance, and examples of each. It also covers the importance of financial services for economic growth, promotion of savings and investments, and risk minimization. Finally, it distinguishes between fund-based financial services that involve raising and investing funds, and fee-based services involving specialized activities like stock broking, credit ratings, and asset securitization.
Factoring and forfaiting are forms of invoice financing that provide liquidity to companies. Factoring involves the sale of accounts receivable to a factor at a discount, who then takes on the responsibility of collection and provides financing against the receivables. Forfaiting specifically refers to financing of international trade receivables without recourse to the exporter. Key differences are that forfaiting provides 100% financing without recourse and guarantees against political and exchange rate risks, for longer tenors of 3-5 years, while factoring also includes receivables administration and is for shorter terms. Factoring is more widely used in India while forfaiting remains less developed due to issues like high costs and lack
Factoring- FINANCE FOR UGC-NET COMMERCE & MANAGEMENTDIwakar Rajput
This document discusses various types of factoring. Factoring allows a seller to receive immediate payment from a third party for invoices, with the third party then collecting payment from customers. There are several types of factoring arrangements: recourse factoring, where the seller bears the risk of non-payment; non-recourse, where the factor assumes this risk; maturity factoring with no advance but payment after collection; and advance factoring with a 75-85% advance. Factoring can also involve invoice discounting, various levels of services provided, and domestic versus cross-border arrangements.
INTRODUCTION # HISTORY # MEANING AND DEFINITION # TERMINOLOGY USED # CHARACTERISTICS OF FACTORING # NATURE OF FACTORING # FUNCTIONS OF FACTORING # MECHANISM OF FACTORING # PARTIES TO FACTORING # TYPES OF FACTORING # COST OF SERVICES # ADVANTAGES AND LIMITATIONS OF FACTORING
COMMERCIAL BANKS & SCHEMES OF COMMERCIAL BANKS.pptxkittustudy7
The document discusses various loan schemes offered by commercial banks to small businesses and MSMEs. It describes fund based facilities like loans, overdrafts, cash credits, and bill discounting which provide working capital. It also discusses non-fund based facilities like letters of credit and bank guarantees. The document provides details on the purpose and functioning of each facility.
1. Factoring and securitization are innovative sources of long-term finance. Factoring involves the purchase of a firm's account receivables by a factoring company, which then undertakes the risk of collection and provides immediate cash to the firm. Securitization converts illiquid loan assets into marketable securities that can be sold to investors, making the loans liquid.
2. The key parties in factoring are the client firm, its debtors, and the factor. The factor provides financing against receivables, undertakes responsibility for collection, and absorbs the risks of default in exchange for a fee. Securitization pools assets like loans and converts them into instruments that can be traded on financial markets.
The document provides an introduction to financial management. It defines finance as the management of money and discusses how financial managers are responsible for raising and allocating business funds. The document outlines different goals of financial management like profit and wealth maximization. It also describes various long-term sources of financing like shares, debentures, and loans. Short-term financing options like bank loans, commercial paper, and trade credit are also summarized. The key aspects and features of different financing instruments are defined.
Introduction to factoring, history, introduction to act, important features of the act, rights, obligation, responsibility, penality, shortcomings of the act.
The document provides an introduction to financial management. It defines finance as the art and science of managing money. The goals of financial management are profit maximization and wealth maximization. Sources of financing include long term sources like shares, debentures, loans, and short term sources like bank financing, trade credit, and commercial paper. Long term financing is for over 5 years while short term is less than 1 year.
Factoring and forfaiting are both forms of invoice financing for businesses. Factoring involves the purchase of accounts receivable by a factoring company, which then takes on the responsibility of collecting payments from customers. It is usually used for domestic and export receivables with credit periods under 180 days. Forfaiting specifically refers to the forfeiting of rights to future export receivables in exchange for an upfront discounted payment. It is used for longer term export receivables over 180 days and provides financing without recourse for the exporter. The key differences between the two are the parties involved, eligible receivables and credit periods, and level of services provided.
This document provides information on factoring and forfaiting. It defines factoring as the purchase of accounts receivables by a factoring company, which provides financing, debt collection services, and protects against bad debts. Forfaiting involves the outright sale of receivables to a forfaiter at a discounted price without recourse to the seller. The key differences between the two are that factoring is for ongoing arrangements, provides various services, and has no minimum transaction size, while forfaiting is for single transactions over $250k and only provides discounted financing without recourse.
This document discusses various sources of short-term financing for businesses, including trade credit, unsecured loans, secured loans, factoring accounts receivables, inventory, and commercial paper. It provides details on types of trade credit like open accounts, notes payable, and trade acceptances. It also explains factors that influence credit terms, types of credit terms, and when businesses should use trade credit. Details are given on unsecured loans, secured loans by pledging accounts receivable or inventory, and commercial paper.
Commercial banks play an important role in economic development by mobilizing savings, financing different sectors, and implementing monetary policy. They accept deposits and provide loans to individuals, businesses, and sectors like industry, trade, agriculture, and consumers. Banks offer various deposit accounts and loan products. They also perform agency functions and provide other services like foreign exchange, bill discounting, and underwriting. In developing countries specifically, banks help channel savings into productive investments, finance key sectors, and raise living standards by expanding access to credit.
The document provides an overview of financial management. It defines financial management as planning and controlling a company's finances to achieve its objectives in the most cost effective way. It discusses various short term and long term sources of finance, traditional and modern approaches to financial management, and key concepts like time value of money, risk-return tradeoff, and types of interest rates. It also provides a brief introduction to the Indian capital market and its primary and secondary segments.
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2. Factoring
• Factoring is a transaction in which a business
sells its invoices, or receivables, to a third-
party financial company known as a “factor.”
The factor then collects payment on those
invoices from the business’s customers.
• The main reason that companies choose to
factor is that they want to receive cash quickly
on their receivables, rather than waiting
3. • Factoring allows companies to quickly build up
their cash flow, which makes it easier for
them to pay employees, handle customer
orders and add more business.
4. Mechanism of Factoring
• 1. Customer places an order with the client for
goods and services on credit. Client delivers
the goods and sends the invoices to the
customers.
• 2. Client assigns invoice to the factor.
• 3. Factor makes prepayment up to 80 % and
sends periodical statements
5. • 4. Monthly statement of accounts to customer
and follow up.
• 5. Customer makes payment to factor.
• 6. Factor makes balance 20% payment on
realization to the client
6. • Factor – Special/expert of handling
receivables who provides the following two
services to its clients:-
1.Management of receivables
2.Loan against Receivables
(Loan or Advance or Finance)
7. Cost and benefits of Factoring
• Cost –
• (a)Commission for management of
receivables
• (b) Interest for financing of receivables
• Benefits
• (a) Reduction in the collection cost, bad debts,
collection cost.
• (b) Release of working capital blocked in
receivables due to additional finance.
8. • Factoring
• Factoring is the continuing arrangement
between a financial intermediary known as
factor and business concern (the client )
whereby the factor purchases the client’s
accounts receivables/book debts.
• This relation enables the factor to control the
credit extended to the customer and
administer the sales ledger.
9. Types of Factoring
• Recourse factoring –
• Recourse factoring means the credit risk of
the customers of the business is assumed by
the business only and not by the factor.
• Essentially, in this type of factoring the factor
is only a financing and collecting agent for the
business. .
10. • Non-recourse factoring allows a company to
sell its invoices to a factor without the
obligation of absorbing any unpaid invoices.
• If the trade debtor fails to make a payment
the factor can not recover this amount from
the client.
• High factoring charges are high
• Mostly found in developed countries where
the high credit rating services available.
11. • Advance factoring - Under advance factoring
arrangement, money is paid by the factor to
the business in advance.
• However, not the entire amount is paid in
advance, but a certain percentage of the
receivables is paid in advance.
• The balance amount is paid on the guaranteed
payment date.
12. • Maturity factoring,
• There are factoring services which offer the
benefit of collection mainly.
• Maturity factoring is that kind of factoring where
the invoice amount is paid after the realization
from the customer.
• The job of a factor is to collect the money from
the customer. Here, the charges of factoring
would also be less as the component of interest
would be dropped.
13. • For example, an invoice maturing on
25th
August, 2016 shall be either paid off
25th
August 2016 or any other date after
maturity decided between the client and the
factor.
14. Old Line factoring
• Aka Full factoring
• Provides entire spectrum of services such as
collection, credit protection, sales ledger
administration
15. DOMESTIC AND CROSS BORDER
FACTORING
• Factor giving the services of purchase,
management, funding and collection of accounts
receivable in domestic territory is termed as
domestic factoring.
• Here three parties are involved i.e. buyer, seller,
and factor who are located in the same country.
• Whereas, if the same services are provided in
international markets then it is termed as cross-
border factoring.
• Here four parties are involved i.e. exporter,
importer, export factor and import factor.
16. Forfaiting
• Forfaiting is a means of financing used by
exporters that enables them to receive cash
immediately by selling their medium-
term receivables (the amount an importer owes
the exporter) at a discount.
• The exporter also eliminates risk by making the
sale without recourse, which means that the
exporter has no liability regarding possible
default by the importer on paying the
receivables.
17. • The forfaiter is the individual or entity that
purchases the receivables. The importer is
then obligated to pay the receivables amount
to the forfaiter.
• A forfaiter is typically a bank or a financial firm
that specializes in export financing.
•
18. • Forfeiting involves large projects, large value
transactions, capital goods and commodities
and offers a credit period of a long period
such as five years.
• Forfeiting is popular among companies and
exporters that sell high-value capital goods as
it offers payment security.
19.
20. Types of Factoring
• 1. Recourse Factoring
• Bad debt will be borne by the company and
not by Factor.
• 2. Non Recourse Factoring (more comission)
• Bad debt will be borne by the factor not by
the company. (Savings of the bad debt will
definitely occur to the company).
22. • 3. Bulk or Agency Factoring – Factor only
finances the receivables. Management of
receivables is managed by the company.
• 4. Non Notification Factoring – The customers
and the company are not notified about the
appointment of factor.
24. • Lease is a contract between Lessor (owner of
asset), and a Lessee (User of asset).
• Under the contract the owner gives the right
to use the asset to the user, over an agreed
period of time, for a consideration called
Lease Rentals.
• In long lease contracts there is an option to
renew the Lease contract.
26. Operating Lease
• Short term Cancellable Lease agreements are
known as Operating Leases.
• Used in Convenience and instant services.
• Eg. Tourist renting a car
• Lease contract for office equipments car,
trucks, Hotel room etc.
• Lessor is generally responsible for
maintenance and insurance of the asset.
27. Financial Lease
• Long term, non cancellable lease contracts
• Eg – Plant , machinery, land, building, ships
• Insurance and maintenance responsibility of
Lessee
28. Financial Lease
• A financial lease is a method used by a
business for acquisition of equipment with
payment structured over time.
• To give proper definition, it can be expressed
as an agreement wherein the lessor receives
lease payments for the covering of ownership
costs.
• The lessee holds the responsibility of
maintenance, taxes, and insurance.
29.
30. Merchant Bank
• An institution which covers wide range of
activities such as management of customer
services, portfolio management, credit
syndication, Insurance, counselling etc
31. Merchant Bank
• SEBI defines Merchant banker as:-
• Merchant banker is a person who is engaged
in the business of issue management, either
by making arrangements regarding selling,
buying or subscribing to securities, or acting as
a manager, consultant or advisor or rendering
corporate advisory services in relation to such
issue management.
32. • It is mandatory to appoint a merchant banker in
case of public issues, rights issues and buybacks.
• Merchant bankers facilitate the issue process by
directing and coordinating the activities with
underwriters, registrars and bankers.
• Merchant bankers appropriately do the pricing
and marketing the issue and complying with the
SEBI guidelines.
• Merchant banker can not hold any public deposit.
33. • SBI first indian merchant banker to set up
Merchant banking division in 1972
34. • Some leading Merchant bankers registered
with SEBI are:
• SBI capital market Ltd.
• ICICI securities Ltd.
• Kotak Mahindra capital company Ltd.
• Reliance securities etc
35. Services
• Project counseling (Checking
viablility/feasibility, project reporting, getting
loan
• Loan Syndication
• Corporate counseling - Counsels the
companies in project management, capital
restructuring, raising capital, managing
working capital, lease financing
37. • The pre issue management is divided in to:-
1.Issue through Prospectus, and Private
placement
2.Marketing and Underwriting
3.Pricing of issue (Book building, Upper band
Lower band, Issue at Premium/discount/face
value)
38. • Post Issue Obligations
• Submitting the post issue monitoring reports.
• Redressal of the investor grievances.
• Maintaining a close coordination with the
intermediaries.
• Ensuring full subscription of the issue
• Finalising basis of the allotment and allotment
procedure.
40. • A mutual fund is a common pool of money
into which investors place their contributions
that are to be invested in different types of
securities in accordance with the stated
objective.
43. Open ended Funds
• An open-end fund is a type of mutual fund that
does not have restrictions on the amount of units
the fund can issue.
• Purchasing units creates new ones, whereas
selling units takes them out of circulation.
• Units are bought and sold on demand at their net
asset value (NAV), which is based on the value of
the fund’s underlying securities and is calculated
at the end of the trading day.
44.
45.
46.
47.
48.
49.
50. Advantages of Mutual Funds
• Portfolio diversification: It enables him to
hold a diversified investment portfolio even
with a small amount of investment like Rs.
2000/-
• Professional management: The investment
management skills, along with the needed
research into available investment options,
ensure a much better return as compared to
what an investor can manage on his own.
51. • Reduction/Diversification of Risks: The
potential losses are also shared with other
investors.
• Reduction of transaction costs: The investor
has the benefit of economies of scale; the
funds pay lesser costs because of larger
volumes and it is passed on to the investors.
52. • Wide Choice to suit risk-return profile: Investors
can chose the fund based on their risk tolerance
and expected returns.
• Liquidity: Investors may be unable to sell shares
directly, easily and quickly. When they invest in
mutual funds, they can cash their investment any
time by selling the units to the fund if it is open-
ended and get the intrinsic value. Investors can
sell the units in the market if it is close edended
fund.
53. • Convenience and Flexibility: Investors can
easily transfer their holdings from one scheme
to other, get updated market information and
so on.
• Funds also offer additional benefits like
regular investment and regular withdrawal
options.
54. • Transparency: Fund gives regular information
to its investors on the value of the
investments, the proportion invested in each
class of assets and the fund manager's
investment strategy and outlook
• Tax Saving
57. • The term consumer finance refers to the
activities involved in granting credit to
consumers to enable them to possess goods
meant for everyday use.
•
58.
59. Sources of Consumer Finance
• Traders : The predominant agencies that are
involved in consumer finance are traders.
They include sales finance companies, hire
purchase and other such financial institutions.
• Commercial Banks: Commercial Banks
provide finance for consumer durables.
60. • Credit Card Institutions: These institutions
arrange for credit purchase of consumer
goods through respective banks which issue
the credit cards.
• The buyer receives monthly statement from
the card issuing bank or company and the
amount is to be paid within a period of 20 to
45 days.
61. • (NBFC’s):Non banking Financial companies
constitute an important source of consumer
finance.
• Credit Unions: A credit union is an association of
people who agree to save their money together
and in turn provide loans to each other at a
relatively lower rate of interest. These are caller
co-operative credit societies. They are non profit
deposit taking and low cost credit institutions.
62. Advantages of Consumer
Credit(Finance)
• Enjoying possession : An important benefit of
consumer credit is that it allows people to
enjoy possession of goods without having to
pay for them immediately.
• Convenient mode : Consumer credit offers a
convenient mode of acquiring consumer
durables.
63. • Meeting emergency : Consumer credit is useful
in meeting emergencies such as illness, accident
and death which involve unexpected expenses.
• Maximization of revenues: Consumer credit
facilitates speedy disposal of goods which would
have remained unsold in the absence of credit
facility to consumers. This helps in increased
sales and profits through credit sales.
64. V
• Accelerates industrial investment: Consumer
credit accelerates investment in consumer
durable industry giving rise to growing level of
income and employment.
• Enhanced living standard : consumer credit
enables people of limited means to acquire
goods to enhance their general standard of
living.
65. • Promoting Economic development :
Consumer credit promotes higher levels of
investment, employment and income thus
raising the effective demand and promoting
higher standard of growth and development.
66.
67. • Rate of interest : the effective rate of
consumer finance is much higher than the
rates applicable to business finance. This is
because the loans are granted based on the
personal integrity of the customer.
69. • A commercial bank is a financial institution
which performs the functions of accepting
deposits from the general public and giving
loans for investment with the aim of earning
profit.
70. Services provided by Commercial
Banks
• 1. Advancing of Loans
• Banks are profit oriented business
organizations. So they have to advance loan to
the public and generate interest from them as
profit.
• After keeping certain cash reserves, banks
provide short-term, medium-term and long-
term loans to needy borrowers.
71. • 2. Overdraft
• Sometimes, the bank provides overdraft
facilities to its customers through which they
are allowed to withdraw more than their
deposits. Interest is charged from the
customers on the overdrawn amount.
72. • 3. Discounting of Bills of Exchange
• This is another popular type of lending by the modern
banks. Through this method, a holder of a bill of
exchange can get it discounted by the bank, in a bill of
exchange, the debtor accepts the bill drawn upon him
by the creditor (i.e., holder of the bill) and agrees to
pay the amount mentioned on maturity.
• After making some marginal deductions (in the form of
commission), the bank pays the value of the bill to the
holder. When the bill of exchange matures, the bank
gets its payment from the party, which had accepted
the bill.
73. • 4. Cheque Payment
• Banks provide cheque pads to the account
holders. Account holders can draw cheque
upon the bank to pay money. Banks pay for
cheques of customers after formal verification
and official procedures.
74. • Foreign Currency Exchange
• Banks deal with foreign currencies. As the
requirement of customers, banks exchange
foreign currencies with local currencies, which
is essential to settle down the dues in the
international trade.
75. • Consultancy
• Modern commercial banks are large
organizations. They can expand their function
to consultancy business. In this function,
banks hire financial, legal and market experts
who provide advice to customers in regarding
investment, industry, trade, income, tax etc.
76. • Remittance of Funds
• Banks help their customers in transferring
funds from one place to another through
cheques, drafts, etc.
77. • Credit cards
• A credit card is cards that allow their holders
to make purchases of goods and services in
exchange for the credit card’s provider
immediately paying for the goods or service,
and the card holder promising to pay back the
amount of the purchase to the card provider
over a period of time, and with interest.
78. • ATMs Services
• ATMs replace human bank tellers in
performing basic banking functions such as
deposits, withdrawals, account inquiries. Key
advantages of ATMs include:
• 24-hour availability
• Elimination of labor cost
• Convenience of location
79. • Debit cards
• Debit cards are used to electronically
withdraw funds directly from the cardholders’
accounts. Most debit cards require a Personal
Identification Number (PIN) to be used to
verify the transaction.
80. • Online banking
• Online banking is a service offered by banks that
allows account holders to access their account data via
the internet. Online banking is also known as “Internet
banking” or “Web banking.”
• Online banking through traditional banks enable
customers to perform all routine transactions, such as
account transfers, balance inquiries, bill payments, and
stop-payment requests, and some even offer online
loan and credit card applications. Account information
can be accessed anytime, day or night, and can be
done from anywhere.
81. • Mobile Banking
• Mobile banking (also known as M-Banking) is
a term used for performing balance checks,
account transactions, payments, credit
applications and other banking transactions
through a mobile device such as a mobile
phone or Personal Digital Assistant (PDA),
82. • Accepting Deposit
• Accepting deposit from savers or account
holders is the primary function of a bank.
Banks accept deposit from those who can
save money but cannot utilize in profitable
sectors. People prefer to deposit their savings
in a bank because by doing so, they earn
interest.