Scribd Logo
Upload

Welcome to Scribd!

  • 11 views

    Presented By-Peter Machkuri

    Uploaded by

    Peter machkuri
    This document discusses factoring, which is when a business sells its accounts receivable to a third party called a factor in exchange for immediate money. Factoring provides businesses with financing and other services like account maintenance, debt collection, and credit risk protection. It is useful when a business needs more cash flow. The factor takes on responsibilities like ledger maintenance, collection of receivables, and credit control. There are different types of factoring arrangements depending on whether credit risk passes to the factor and whether the factor's name is disclosed to customers.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Presented By-Peter Machkuri

    Uploaded by

    Peter machkuri
    11 views15 pages
    This document discusses factoring, which is when a business sells its accounts receivable to a third party called a factor in exchange for immediate money. Factoring provides businesses with financing and other services like account maintenance, debt collection, and credit risk protection. It is useful when a business needs more cash flow. The factor takes on responsibilities like ledger maintenance, collection of receivables, and credit control. There are different types of factoring arrangements depending on whether credit risk passes to the factor and whether the factor's name is disclosed to customers.

    Original Description:

    Presentation on factoring in mutual funds

    Original Title

    Factoring

    Copyright

    © © All Rights Reserved

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    This document discusses factoring, which is when a business sells its accounts receivable to a third party called a factor in exchange for immediate money. Factoring provides businesses with financing and other services like account maintenance, debt collection, and credit risk protection. It is useful when a business needs more cash flow. The factor takes on responsibilities like ledger maintenance, collection of receivables, and credit control. There are different types of factoring arrangements depending on whether credit risk passes to the factor and whether the factor's name is disclosed to customers.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    11 views15 pages

    Presented By-Peter Machkuri

    Uploaded by

    Peter machkuri
    This document discusses factoring, which is when a business sells its accounts receivable to a third party called a factor in exchange for immediate money. Factoring provides businesses with financing and other services like account maintenance, debt collection, and credit risk protection. It is useful when a business needs more cash flow. The factor takes on responsibilities like ledger maintenance, collection of receivables, and credit control. There are different types of factoring arrangements depending on whether credit risk passes to the factor and whether the factor's name is disclosed to customers.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    You are on page 1of 15

    PRESENTED BY-

    PETER
    MACHKURI
     Factoring is a financial transaction whereby a
    business sells its accounts receivable
    (i.e., invoices) to a third party (called a factor) at
    a discount in exchange for immediate money with
    which to finance continued business.
    “factoring means an arrangement between a factor
    and his client which includes at least two of the
    following services to be provided by the factor-
    1) Finance
    2) Maintenance of accounts
    3) Collection of debts
    4) Protection against credit risk
     Factoring is used by a firm when the available
    Cash Balance held by the firm is insufficient to
    meet current obligations and accommodate its
    other cash needs, such as new orders or contracts.
    Buyer

    Client customer

    collectio
    n
    factor
    a) Follow-up and collection of Receivables from
    Clients or Customers..
    b) Purchase of Receivables with or without
    recourse.
    c) Help in getting information and credit line on
    customers (credit protection)
    d) Sorting out disputes , due to his relationship
    with Buyer & Seller.
     A factor performs a number of functions for his
    client.
    1. Maintenance of Sales Ledger:
    A factor maintains sales ledger for his client
    firm. An invoice is sent by the client to the
    customer, a copy of which is marked to the
    factor. The client need not maintain individual
    sales ledgers for his customers.
    2. Collection of Accounts Receivables:
    Under factoring arrangement, a factor undertakes
    the responsibility of collecting the receivables
    for his client. Thus, the client firm is relieved of
    the rigours of collecting debts and is thereby
    enabled to concentrate on improving the
    purchase, production, marketing and other
    managerial aspects of the business.
    3. Credit Control and Credit Protection:
    Another useful service rendered by a factor is
    credit control and protection. As a factor
    maintains extensive information records
    (generally computerized) about the financial
    standing and credit rating of individual
    customers and their track record of payments,
    he is able to advise its client on whether to
    extend credit to a buyer or not and if it is to be
    extended the amount of the credit and the
    period there-for.
    a) Recourse Factoring.

    b) Non-recourse Factoring.

    c) Disclosed Factoring.

    d) Cross-border Factoring.
    a) Up to 75 % to 85 % of the Invoice Receivable is
    factored.
    b) Interest is charged from the date of advance to the
    date of collection.
    c) Factor purchases Receivables on the condition that
    loss arising on account of non-recovery will be borne
    by the Client.
    d) Credit Risk is with the Client.
    e) Factor does not participate in the credit sanction
    process.
    f) In India, factoring is done with recourse.
    a) Factor purchases Receivables on the condition that the Factor
    has no recourse to the Client, if the debt turns out to be non-
    recoverable.

    b) Credit risk is with the Factor.

    c) Higher commission is charged.

    d) Factor participates in credit sanction process and approves


    credit limit given by the Client to the Customer.

    e) In USA/UK, factoring is commonly done without recourse.


    The factoring in which the factors' name is indicated
    in the invoice of by the supplier of the goods and
    services asking the purchaser to pay the factor ,is
    called disclosed factoring.

     The form of factoring in which the name of the


    factor is not mentioned in the invoice issued by
    the manufacturer. In such a case the factor
    maintains sales ledger of the client and the debt is
    realized in the name of the firm is called
    Undisclosed factoring.
     It is similar to domestic factoring except that there
    are four parties, viz.,
    a) Exporter (Client)
    b) Export & Importer Factor
    c) Importer (Customer)

    It is also called two-factor system of factoring.


     Exporter (Client) enters into factoring arrangement
    with Export Factor in his country and assigns to him
    export receivables.

    You might also like

    pFad - Phonifier reborn

    Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

    Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


    Alternative Proxies:

    Alternative Proxy

    pFad Proxy

    pFad v3 Proxy

    pFad v4 Proxy