23480061 factoring services ppt

7/28/2019 23480061 Factoring Services Ppt

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FACTORING SERVICES


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SBI FACTORS & COMMERCIAL

SERVICES PVT. LTD.

WELCOMES YOU ALL


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AND

COMMERCIAL SERVICES LTD.

SBI FACTORS

THE KASHf lo SOLUTION

PRESENTS


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FACTOR CUSTOMER

CLIENT

Sendsinvoice

stocustomer

Statement to customer

Payment to Factor


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INDUSTRIES THAT CAN

BE COVERED BY FACTORING

Small Scale Industries with growth potentials

Medium Scale Industries

Service Industries


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Factoring is a financial service coveringthe financing and collection of accountsreceivables in domestic as well as ininternational trade. Basically, factoringis an arrangement in which receivables

on account of sale of goods or servicesare sold to the factor at a certaindiscount.


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As the factor gets the title to thereceivables on account of the factoringcontract, factor becomes responsible forall credit control, sales ledgeradministration and debt collection

from the customers.


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Any of the two services to be

provided The following services to be provided

by the factor; I) finance, (ii)maintenance of accounts, (iii) collectionof debts and (iv) protection againstcredit risk.


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FACTORING V/S BILLS

DISCOUNTING THE MAJOR DIFFERENCE BETWEEN

THE TWO IS THAT BILLSDISOUNTING IS ALWAYS WITHRECOURSE, WHEREAS FACTORINGMAY BE WITH OR WITHOUT

RECOURSE.


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1. Individual Transaction.

2. Each bill has to beindividually accepted bythe drawee. This takestime.

3. Stamp duty is charged oncertain usance billstogether with bankcharges. It proves veryexpensive

1. Whole turnover basis.Thisalso gives the client theliberty to draw desired

finance only.2. A one time notification is

taken from the customer atthe commencement of thefacility.

3. No stamp duty is charged onthe invoices. No chargesother than the usual financeand service charge.

Bill Discounting Factoring


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Bill Discounting Factoring

4. More paperwork isinvolved.

5. Grace period for payment

is usually 3 days.6. Original documents like

MTR, RR, Bill of Ladingare to be submitted.

7. Charges are normally up

front.

4. No such paperwork isinvolved.

5. Grace period are far

more generous.

6. Only copies of suchdocuments arenecessary.

7. No up front charges.

Finance charges arelevied on only theamount of moneywithdrawn .


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Buyer negotiates terms of purchasingthe material with the seller. Buyer

receives delivery of goods with invoiceand instructions by the seller to makepayment to factor on due date


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Buyer makes payment to factor in timeor gets extension of time or in the case

of default is subject to legal process atthe hands of the factor


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Seller MoU with the buyer in the formof letter exchanged between them or

agreement Sells goods to the buyer asper MoU/agreement


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Delivers copies of invoice, deliverychallan, MoU, instructions to make

payment to factor given to buyer.


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Seller receives 80 percent or morepayment in advance from factor on

selling the receivables from buyer tofactor. Seller receives balance paymentfrom factor after deduction of factors

service charges, etc .


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Parties to factoring client, customerand factor. Cost of factoring Service

fee (for administrating the sales ledgeras well as protection against bad debts as a percentage of invoice value or

number of invoices) Discount charges(advance provided by factor and isinterest which is PLR plus or minus)


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In bill discounting drawer undertakesthe responsibility of collecting the bills

and remitting the proceeds to financingagency, whereas a factor usuallyundertakes to collect the bills of the

client


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Bill discounting facility implies onlyprovision of finance but a factor also

provides other services like salesledger maintenance and advisoryservices


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Discounted bills may be rediscountedseveral times before they mature for

payment. Debts purchased forfactoring cannot be rediscounted, theycan be refinanced .


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Factoring implies the provision of bulkfinance against several unpaid trade

generated invoices in batches, billfinancing is individual transaction-oriented each bill is separately

assessed and discounted


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Factoring is an off-balance mode offinancing. Bill discounting does not

involve assignment of debts as is thecase with factoring.


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Problem 1 - Your buyers credit risk.

Will your buyers pay you on time? Ifthey fail to pay or become insolvent,will your company be able to affordthis type of loss?


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Problem 2 - Your company lacks cashflow.

Your company sells on open account.You end up waiting many days ormore often months before you are paid.

Your business will soon find itselfshort of working capital.


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Problem 3 - Managing your salesledger.

Your company has many customers.Managing all of these buyer accountsconsumes an every growing amount of

time, energy and resources.


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Problem 4 - Collecting your payment.

When your invoices get past due, youmust allocate precious time tocollecting the funds you are owed.


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By utilizing accounts receivables factoringservices your company will enjoy the

following benefits: Trade financing

Credit risk control and bad debt

protection Management of sales ledger

Relief from collection headaches


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Easy finance - by simply providingcopies of your documents and invoices

that show you have delivered thegoods and your company will then gettrade finance and other services of your

choosing. More credit sales will resultin more finance for your company.


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Low cost - compared to working capital loansand under factoring the finance period is

much more flexible. Using our businessinvoice factoring services, your companycan:

Save significant interest expenses.

Outsource management of your sales ledger.Divert human resources to more productive

work.


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Market expansion - using our businessinvoice factoring services, your

company will become morecompetitive and gain a larger marketshare because you will not have to fear

granting credit to your buyers.


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Profit increase - when you have anexpanded market share, a risk

protection program in place, enoughcash flow to fund your growth, you aresure to multiply your profits.


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THANK YOU

23480061 factoring services ppt

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