Description
In "advance" factoring, the business owner sells his receivables in the form of invoice to the factor, who makes an advance of 70-85% of the purchase price of the receivable amount.
Factoring in India
What is factoring? Factoring is a financial option for the management of receivables. In simple definition it is the conversion of credit sales into cash. In factoring, a financial institution (factor) buys the accounts receivable of a company (Client) and pays up to 80%(rarely up to 90%) of the amount immediately on agreement. Factoring company pays the remaining amount (Balance 20%finance cost-operating cost) to the client when the customer pays the debt. Collection of debt from the customer is done either by the factor or the client depending upon the type of factoring. We will see different types of factoring in this article. The account receivable in factoring can either be for a product or service. Examples are factoring against goods purchased, factoring for construction services (usually for government contracts where the government body is capable of paying back the debt in the stipulated period of factoring. Contractors submit invoices to get cash instantly), factoring against medical insurance etc. Let us see how factoring is done against an invoice of goods purchased.
Factor Client Customer
Pays the amount (In recourse type customer pays through client) credit sale of goods Invoice Submit invoice copy Payment up to 80% initially Pays the balance amount
Characteristics of factoring 1. Usually the period for factoring is 90 to 150 days. Some factoring companies allow even more than 150 days. 2. Factoring is considered to be a costly source of finance compared to other sources of short term borrowings. 3. Factoring receivables is an ideal financial solution for new and emerging firms without strong financials. This is because credit worthiness is evaluated based on the financial strength of the customer (debtor). Hence these companies can leverage on the financial strength of their customers. 4. Bad debts will not be considered for factoring. 5. Credit rating is not mandatory. But the factoring companies usually carry out credit risk analysis before entering into the agreement. 6. Factoring is a method of off balance sheet financing. 7. Cost of factoring=finance cost + operating cost. Factoring cost vary according to the transaction size, financial strength of the customer etc. The cost of factoring vary from 1.5% to 3% per month depending upon the financial strength of the client's customer. 8. Indian firms offer factoring for invoices as low as 1000Rs 9. For delayed payments beyond the approved credit period, penal charge of around 1-2% per month over and above the normal cost is charged (it varies like 1% for the first month and 2% afterwards). Different types of Factoring
1. Disclosed and Undisclosed 2. Recourse and Non recourse A single factoring company may not offer all these services. Disclosed In disclosed factoring client's customers are notified of the factoring agreement. Disclosed type can either be recourse or non recourse. Undisclosed In undisclosed factoring, client's customers are not notified of the factoring arrangement. Sales ledger administration and collection of debts are undertaken by the client himself. Client has to pay the amount to the factor irrespective of whether customer has paid or not. But in disclosed type factor may or may not be responsible for the collection of debts depending on whether it is recourse or non recourse. Recourse factoring In recourse factoring, client undertakes to collect the debts from the customer. If the customer don't pay the amount on maturity, factor will recover the amount from the client. This is the most common type of factoring. Recourse factoring is offered at a lower interest rate since the risk by the factor is low. Balance amount is paid to client when the customer pays the factor. Non recourse factoring In non recourse factoring, factor undertakes to collect the debts from the customer. Balance amount is paid to client at the end of the credit period or when the customer pays the factor whichever comes first. The advantage of non recourse factoring is that continuous factoring will eliminate the need for credit and collection departments in the organization.
Factoring companies in India
Canbank Factors Limited:
http://www.canbankfactors.com http://www.sbifactors.com http://www.hsbc.co.in/1/2/corporate/trade-and-
SBI Factors and Commercial Services Pvt. Ltd:
The Hongkong and Shanghai Banking Corporation Ltd:
factoring-services
Foremost Factors Limited:
http://www.foremostfactors.net http://www.gtfindia.com
Global Trade Finance Limited:
Export Credit Guarantee Corporation of India Ltd:
https://www.ecgc.in/Portal/productnservices/maturity/mfactoring.asp
Citibank NA, India:
http://www.citibank.co.in http://www.sidbi.in/fac.asp
Small Industries Development Bank of India (SIDBI): Standard Chartered Bank:
www.standardchartered.co.in
Click here to contact the Factors Chain International members from India
About cBfl OUR MISSION Our mission is to enhance your cash flow and assist your business thrive and grow.
OUR COMMITMENT Our commitment is to continue to remain in the forefront by constantly upgrading our products and bettering our services to meet the demands of our clients. A subsidiary of CANARA BANK, a leading Public Sector Bank, reputed for its diversified and professional services. Incorporated in the year 1991, with Small Industries Development Bank of India(SIDBI) and Andhra Bank as co-promoters. As a Non-Banking Financial Company, the Company is governed by the Regulatory Norms of Reserve Bank of India. As one of the leading factoring industry in INDIA , with a Factored Turnover of Rs.3734.57 crores (as on 31st March 2010). The Chairman & Managing Director and the Executive Director of CANARA BANK are the CHAIRMAN and the VICE CHAIRMAN respectively of the Company.Managed by the Managing Director, a executive in top management cadre deputed from CANARA BANK, under the guidance and control of Board of Directors, consisting of eminent personalities from Financial Sector. The day-to-day affairs of the company are managed professionally, by a team of qualified and committed executives and officials, deputed from Canara Bank. Our company continues to enjoy the highest rating of "P1+" by CRISIL for its Short Term Debt Programme of Rs. 400 crores. The assigned ratings reflect Canbank Factors Limited's (CBF) strong market position in the domestic factoring business and its comfortable earnings profile. While the inherent vulnerability of its asset portfolio (on account of the dominant exposure to small and medium enterprises) moderates CBF's credit profile, the company's demonstrated ability to maintain low delinquency levels is a key factor supporting the rating. The
OUR BUSINESS Our business is to convert your accounts receivable into instant cash as soon as you bill your customers.
rating also reflects the strengths that CBF derives from its majority ownership by Canara Bank. LAST THRE E YEAR S The Key Business Figures For The Last Three Years
SL. PARAMETER NO.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Capital Reserves & Surplus ($) Loan Funds Factored Turnover Total Income Funds In Use Average Funds in Use Profit Before Tax Profit After Tax Dividend Return on Equity (%) Net Owned Funds NPA (Absolute figure) NPA as % of FIU Net NPA
2007-08
20.00 85.82 623.49 3483.24 78.07 739.34 597.6 30.34 20.19 3.51 19.08 105.82 5.07 0.69 Nil
2008-09
20.00 101.85 483.73 3178.54 85.08 619.73 608.92 31.26 19.69 3.51 16.16 121.84 24.31 3.92 2.62
2009-10
20.00 119.13 734.97 3734.57 84.56 902.83 715.11 36.55 24.37 3.74 17.52 139.13 25.65 2.84 0.87
Bank Finance to Factoring Companies
Reserve Bank of India in its notification dated 12th February 2008, has permitted banks to extend financial assistance to support the factoring business of Factoring Companies which comply with the following criteria: a) The companies carry out all the components of a standard factoring activity, viz., financing of receivables, sale-ledger management and collection of receivables. b) They derive at least 80 per cent of their income from factoring activity. c) The receivables purchased/financed, irrespective of whether on 'with recourse' or 'without recourse' basis, form at least 80 per cent of the assets of the Factoring Company. d) The assets/income referred to above would not include the assets/income relating to any bill discounting facility extended by the Factoring Company. e) The financial assistance extended by the Factoring Companies is secured by hypothecation or assignment of receivables in their favour. As per the existing guidelines, bills discounted / rediscounted by NBFCs (which is deemed to include any other mode of financing of receivables of the borrowers), except those arising from sale of certain types of vehicles, are not eligible for bank finance. Further, the
unsecured loans extended by the NBFCs to other companies are also ineligible for bank finance.
SBI Factors, a subsidiary of State Bank Of India, is one of the leading factoring companies in India with an asset base of Rs 1908.00 crores as on March 31, 2008. It is the first factoring company to be set up in India. It was incorporated in February 1991 and commenced business operations from April 1991. State Bank of India and its 2 associate banks have a 70% stake in SBI Factors while 20% is held by Small Industries Development Bank Of India (SIDBI) and 10% by Union bank of India . As on March 31, 2008 , it has a maximum market share in factoring business in India.
ntroduction IFCI Factors Limited (erstwhile Foremost Factors Limited) is a subsidiary of IFCI Limited, which is a leading financial institution of India. Building relationships is vital to your business prospects. For us, this means getting to know you as a client in detail even before you appoint us. Once a relationship is established, we keep ourselves fully up to date at all times with your business and your customers. We become one of your main business partners and ensure highest quality of service delivery to you thus enabling you to stay ahead in a highly competitive global market. IFCI Factors Limited – Key Strength Areas The key factors which help distinguish IFCI Factors Limited as one of the finest factoring service provider are as follows: 1. Relationship: At IFCI Factors Limited, we believe in proactively developing strong and lasting relationships with our clients, their buyers and our correspondent factors (for export factoring). We continuously endeavor to develop transaction structures that best meet the needs of our clients as well as their buyers. 2. Reliability: Being the pioneers in bringing International Factoring to India, we have had a rich experience of over fourteen years behind us which enables us to understand the needs of our clients in the context of their market and service them in the best possible way. 3. Flexibility: We provide innovative, customized solutions which are driven by a forward looking management style, sound understanding of the key credit issues and a thorough understanding of market practices. 4. Service Quality: A lean organisation structure supported by an internationally recognised top of the line software
platform ensures operational efficiency and translates into delivery of high quality services to customers. 1. Turnaround Time: IFCI Factors Limited prides itself in responding quickly to the demands of its customers, which in turn empowers them to capitalise on the attractive opportunities offered by an ever dynamic market. 2. Consistency: With a strong infrastructure and efficient operations, IFCI Factors Limited is able to maintain high service levels related to providing timely funding, follow up for collections, credit protection and management information. 5. Reasonable Charges: At IFCI Factors Limited, we recognise the importance of value for money. This means providing quality services at a reasonable and affordable cost. The factoring charges typically comprise of the following: 1. Discount Charge: This is levied at the month end based on actual fund utilisation by the client. 2. Service Charge: This is levied at a flat rate on the gross invoice value. It covers the cost of credit protection (where specified), sales ledger administration, processing and collections.
Purchase Bill factoring
As the name implies, Purchase Bill Factoring facilitates instant cash for purchases ,made at competitive rates and on flexible terms. It allows purchaser to bargain for cash terms, better quality and immediate delivery. Export Sales Bill Factoring For sales outside India. For your exports, International Factoring works to your advantage by providing you funding, credit assessment, credit protection and collection services. IFCI Factors Limited will help you enhance your competitiveness in the global market with overseas credit protection. We are a member of Factors Chain International (FCI), an organisation of factoring companies headquartered at Amsterdam, Netherlands. FCI boasts of more than 200 factoring companies in nearly 60 countries spread across the six continents. Our International network of correspondent factors go a long way in helping you to overcome all distance and language barriers and establish an easy flow of communication with your customers. Using EDI, the standard international electronic data interchange factoring network, IFCI Factors Limited gives you speedy and reliable reporting on your overseas customer accounts. Sharper Competitive Edge Entrusting your international accounts to us will provide you with the following benefits:
?
Commercial Credit Risk Management: IFCI Factors Limited facilitates open account trading without credit risk by arranging credit protection on agreed terms. In a highly competitive global market, this helps you to procure orders by
?
?
?
?
?
offering more attractive terms to your customers. Overseas Payment Collection: IFCI Factors Limited follows up on payment through its network of Factors with your Customer (Buyer). Prompt Prepayments: We provide initial prepayment against your invoices at an agreed prepayment percentage with the balance being paid on receipt of payment from buyer. Sales Ledger Administration: IFCI Factors Limited maintains the sales ledger for its clients, monitoring the invoices raised and payments received and accordingly performs the necessary follow up for collections. We also provide you with valuable MIS to enable you to take better informed decisions related to pricing, credit terms, debtor quality and so on. Opportunity for Growth: The credit protection provided by IFCI Factors Limited enables you to build your business with international buyers (who are otherwise unwilling to open Letters of Credit) while keeping your credit exposures covered. Instant prepayments against your receivables provide you with the necessary resources required for funding your business growth. Advisory Services: IFCI Factors Limited also offers advisory services to its clients including credit assessment for its overseas buyers through its own network and that of its correspondent factors.
SBI Global Factors Limited (SBIGFL) is the only provider of international factoring, domestic factoring and forfaiting services under one roof in India. SBIGFL has established itself as a market leader in international factoring providing value added servicesto its clients. SBIGFL is headquartered in Mumbai with six regional offices - one each in New Delhi, Bangalore, Chennai, Hyderabad, Ahmedabad and Kolkata. SBIGFL aims to be the premier export and import solution provider in India offering professional quality services on an e-commerce platform. SBI Global Factors Limited (SBIGFL) formerly Global Trade Finance Ltd was promoted as a joint venture by Export Import Bank of India (Exim Bank), West LB, Germany; and International Finance Corporation (‘IFC’), Washington (the private sector arm of World Bank). It commenced its operations from September 2001. In March 2008, State Bank of India purchased the equity stake of Exim Bank, FIM Bank, Malta, and IFC, Washington and acquired 92.08% stake in the GTF. SBI Factors and Commercial Services Private Limited, a subsidiary of SBI promoted by SBI and its associates jointly with SIDBI & Union Bank of India in February 1991 was merged with the Company as per the order passed by the Hon’ble High Court, Mumbai dated 15/01/2010.The merged Company was renamed as SBI Global Factors Ltd. with effect from 23/03/2010. Post Amalgamation, State Bank of India holds 85.39% stake in SBIGFL. Remaining 14.61% is held by SIDBI, Bank of Maharashtra and Union Bank of India. SBIGFL is a member of Factors Chain International, a global association of international factoring
companies Established in 1968, FCI has played a major role in bringing factoring into most countries and today has a membership of 247 factoring companies operating in 66 countries. SBIGFL also has arrangements with credit insurers across the world for providing credit protection. International trade, on the basis of LC's is gradually declining. "Open Account" and "Extended Credit" is becoming a pre-requisite for increasing sales volume in global market. SBIGFL helps this need with its export factoring product that provides credit assessment, credit protection, financing, and collection services to exporters for regular sales on open account terms. SBIGFL uses a high end customized IT platform to process and deliver its services. With a short turn around time in approval of facilities. SBIGFL is the only factoring company in India to offer online web access to its clients for accessing their accounts. SBIGFL's "Client Access" module is custom made to suit its business profile and caters to client requirements.
Export Credit Guarantee Corporation of India Limited, was established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit. Being essentially an export promotion organization, it functions under the administrative control of the Ministry of Commerce & Industry, Department of Commerce, Government of India. It is managed by a Board of Directors comprising representatives of the Government, Reserve Bank of India, banking, insurance and exporting community. ECGC is the fifth largest credit insurer of the world in terms of coverage of national exports. The present paid-up capital of the company is Rs.800 crores and authorized capital Rs.1000 crores. What does ECGC do? Provides a range of credit risk insurance covers to exporters against loss in export of goods and services Offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan How does ECGC help exporters? ECGC Offers insurance protection to exporters against payment risks Provides guidance in export-related activities Makes available information on different countries with its own credit ratings
Makes it easy to obtain export finance from banks/financial institutions Assists exporters in recovering bad debts Provides information on credit-worthiness of overseas buyers Need for export credit insurance Payments for exports are open to risks even at the best of times. The risks have assumed large proportions today due to the far-reaching political and economic changes that are sweeping the world. An outbreak of war or civil war may block or delay payment for goods exported. A coup or an insurrection may also bring about the same result. Economic difficulties or balance of payment problems may lead a country to impose restrictions on either import of certain goods or on transfer of payments for goods imported. In addition, the exporters have to face commercial risks of insolvency or protracted default of buyers. The commercial risks of a foreign buyer going bankrupt or losing his capacity to pay are aggravated due to the political and economic uncertainties. Export credit insurance is designed to protect exporters from the consequences of the payment risks, both political and commercial, and to enable them to expand their overseas business without fear of loss.
Domestic Sales Bill factoring
For sales within India, Steps in Domestic Factoring:
1. 2. 3. 4. 5. 6. 7. 8. Customer ( Buyer) places the order with Client (Seller) Client (Seller) obtains a prepayment limit from IFCI Factors Limited Client (Seller) delivers goods/services to the customer (Buyer). Copies of Invoices, along with a Notice to Pay, are submitted to IFCI Factors Limited IFCI Factors Limited makes a prepayment advance to the Client IFCI Factors Limited follows up on payment with the Customer (Buyer) Customer (Buyer) makes payment to IFCI Factors Limited IFCI Factors Limited makes the balance payment to the Client (Seller), net of charges.
Multi Service Package At IFCI Factors Limited , the Domestic Factoring facility comprises of the following:
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Instant Prepayments: Advances are made to the client based on agreed prepayment percentages on submission of invoices. Balance payment is made on the receipt of payment from the buyer. Sales Ledger Administration: Under a domestic factoring agreement, IFCI Factors Limited manages and operates the Sales Ledger for the Clients, monitoring the invoices issued and payments received. IFCI Factors Limited also provides you with valuable MIS reports to enable you to take better informed credit and pricing decisions. Collection of Payments: IFCI Factors Limited follows up on payment with the Buyers (Seller’s Customer ) and makes the balance payment to its Client (Seller). Advisory Services: IFCI Factors Limited also offers advisory services to its clients such as credit assessment for domestic buyers.
doc_936241618.docx
In "advance" factoring, the business owner sells his receivables in the form of invoice to the factor, who makes an advance of 70-85% of the purchase price of the receivable amount.
Factoring in India
What is factoring? Factoring is a financial option for the management of receivables. In simple definition it is the conversion of credit sales into cash. In factoring, a financial institution (factor) buys the accounts receivable of a company (Client) and pays up to 80%(rarely up to 90%) of the amount immediately on agreement. Factoring company pays the remaining amount (Balance 20%finance cost-operating cost) to the client when the customer pays the debt. Collection of debt from the customer is done either by the factor or the client depending upon the type of factoring. We will see different types of factoring in this article. The account receivable in factoring can either be for a product or service. Examples are factoring against goods purchased, factoring for construction services (usually for government contracts where the government body is capable of paying back the debt in the stipulated period of factoring. Contractors submit invoices to get cash instantly), factoring against medical insurance etc. Let us see how factoring is done against an invoice of goods purchased.
Factor Client Customer
Pays the amount (In recourse type customer pays through client) credit sale of goods Invoice Submit invoice copy Payment up to 80% initially Pays the balance amount
Characteristics of factoring 1. Usually the period for factoring is 90 to 150 days. Some factoring companies allow even more than 150 days. 2. Factoring is considered to be a costly source of finance compared to other sources of short term borrowings. 3. Factoring receivables is an ideal financial solution for new and emerging firms without strong financials. This is because credit worthiness is evaluated based on the financial strength of the customer (debtor). Hence these companies can leverage on the financial strength of their customers. 4. Bad debts will not be considered for factoring. 5. Credit rating is not mandatory. But the factoring companies usually carry out credit risk analysis before entering into the agreement. 6. Factoring is a method of off balance sheet financing. 7. Cost of factoring=finance cost + operating cost. Factoring cost vary according to the transaction size, financial strength of the customer etc. The cost of factoring vary from 1.5% to 3% per month depending upon the financial strength of the client's customer. 8. Indian firms offer factoring for invoices as low as 1000Rs 9. For delayed payments beyond the approved credit period, penal charge of around 1-2% per month over and above the normal cost is charged (it varies like 1% for the first month and 2% afterwards). Different types of Factoring
1. Disclosed and Undisclosed 2. Recourse and Non recourse A single factoring company may not offer all these services. Disclosed In disclosed factoring client's customers are notified of the factoring agreement. Disclosed type can either be recourse or non recourse. Undisclosed In undisclosed factoring, client's customers are not notified of the factoring arrangement. Sales ledger administration and collection of debts are undertaken by the client himself. Client has to pay the amount to the factor irrespective of whether customer has paid or not. But in disclosed type factor may or may not be responsible for the collection of debts depending on whether it is recourse or non recourse. Recourse factoring In recourse factoring, client undertakes to collect the debts from the customer. If the customer don't pay the amount on maturity, factor will recover the amount from the client. This is the most common type of factoring. Recourse factoring is offered at a lower interest rate since the risk by the factor is low. Balance amount is paid to client when the customer pays the factor. Non recourse factoring In non recourse factoring, factor undertakes to collect the debts from the customer. Balance amount is paid to client at the end of the credit period or when the customer pays the factor whichever comes first. The advantage of non recourse factoring is that continuous factoring will eliminate the need for credit and collection departments in the organization.
Factoring companies in India
Canbank Factors Limited:
http://www.canbankfactors.com http://www.sbifactors.com http://www.hsbc.co.in/1/2/corporate/trade-and-
SBI Factors and Commercial Services Pvt. Ltd:
The Hongkong and Shanghai Banking Corporation Ltd:
factoring-services
Foremost Factors Limited:
http://www.foremostfactors.net http://www.gtfindia.com
Global Trade Finance Limited:
Export Credit Guarantee Corporation of India Ltd:
https://www.ecgc.in/Portal/productnservices/maturity/mfactoring.asp
Citibank NA, India:
http://www.citibank.co.in http://www.sidbi.in/fac.asp
Small Industries Development Bank of India (SIDBI): Standard Chartered Bank:
www.standardchartered.co.in
Click here to contact the Factors Chain International members from India
About cBfl OUR MISSION Our mission is to enhance your cash flow and assist your business thrive and grow.
OUR COMMITMENT Our commitment is to continue to remain in the forefront by constantly upgrading our products and bettering our services to meet the demands of our clients. A subsidiary of CANARA BANK, a leading Public Sector Bank, reputed for its diversified and professional services. Incorporated in the year 1991, with Small Industries Development Bank of India(SIDBI) and Andhra Bank as co-promoters. As a Non-Banking Financial Company, the Company is governed by the Regulatory Norms of Reserve Bank of India. As one of the leading factoring industry in INDIA , with a Factored Turnover of Rs.3734.57 crores (as on 31st March 2010). The Chairman & Managing Director and the Executive Director of CANARA BANK are the CHAIRMAN and the VICE CHAIRMAN respectively of the Company.Managed by the Managing Director, a executive in top management cadre deputed from CANARA BANK, under the guidance and control of Board of Directors, consisting of eminent personalities from Financial Sector. The day-to-day affairs of the company are managed professionally, by a team of qualified and committed executives and officials, deputed from Canara Bank. Our company continues to enjoy the highest rating of "P1+" by CRISIL for its Short Term Debt Programme of Rs. 400 crores. The assigned ratings reflect Canbank Factors Limited's (CBF) strong market position in the domestic factoring business and its comfortable earnings profile. While the inherent vulnerability of its asset portfolio (on account of the dominant exposure to small and medium enterprises) moderates CBF's credit profile, the company's demonstrated ability to maintain low delinquency levels is a key factor supporting the rating. The
OUR BUSINESS Our business is to convert your accounts receivable into instant cash as soon as you bill your customers.
rating also reflects the strengths that CBF derives from its majority ownership by Canara Bank. LAST THRE E YEAR S The Key Business Figures For The Last Three Years
SL. PARAMETER NO.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Capital Reserves & Surplus ($) Loan Funds Factored Turnover Total Income Funds In Use Average Funds in Use Profit Before Tax Profit After Tax Dividend Return on Equity (%) Net Owned Funds NPA (Absolute figure) NPA as % of FIU Net NPA
2007-08
20.00 85.82 623.49 3483.24 78.07 739.34 597.6 30.34 20.19 3.51 19.08 105.82 5.07 0.69 Nil
2008-09
20.00 101.85 483.73 3178.54 85.08 619.73 608.92 31.26 19.69 3.51 16.16 121.84 24.31 3.92 2.62
2009-10
20.00 119.13 734.97 3734.57 84.56 902.83 715.11 36.55 24.37 3.74 17.52 139.13 25.65 2.84 0.87
Bank Finance to Factoring Companies
Reserve Bank of India in its notification dated 12th February 2008, has permitted banks to extend financial assistance to support the factoring business of Factoring Companies which comply with the following criteria: a) The companies carry out all the components of a standard factoring activity, viz., financing of receivables, sale-ledger management and collection of receivables. b) They derive at least 80 per cent of their income from factoring activity. c) The receivables purchased/financed, irrespective of whether on 'with recourse' or 'without recourse' basis, form at least 80 per cent of the assets of the Factoring Company. d) The assets/income referred to above would not include the assets/income relating to any bill discounting facility extended by the Factoring Company. e) The financial assistance extended by the Factoring Companies is secured by hypothecation or assignment of receivables in their favour. As per the existing guidelines, bills discounted / rediscounted by NBFCs (which is deemed to include any other mode of financing of receivables of the borrowers), except those arising from sale of certain types of vehicles, are not eligible for bank finance. Further, the
unsecured loans extended by the NBFCs to other companies are also ineligible for bank finance.
SBI Factors, a subsidiary of State Bank Of India, is one of the leading factoring companies in India with an asset base of Rs 1908.00 crores as on March 31, 2008. It is the first factoring company to be set up in India. It was incorporated in February 1991 and commenced business operations from April 1991. State Bank of India and its 2 associate banks have a 70% stake in SBI Factors while 20% is held by Small Industries Development Bank Of India (SIDBI) and 10% by Union bank of India . As on March 31, 2008 , it has a maximum market share in factoring business in India.
ntroduction IFCI Factors Limited (erstwhile Foremost Factors Limited) is a subsidiary of IFCI Limited, which is a leading financial institution of India. Building relationships is vital to your business prospects. For us, this means getting to know you as a client in detail even before you appoint us. Once a relationship is established, we keep ourselves fully up to date at all times with your business and your customers. We become one of your main business partners and ensure highest quality of service delivery to you thus enabling you to stay ahead in a highly competitive global market. IFCI Factors Limited – Key Strength Areas The key factors which help distinguish IFCI Factors Limited as one of the finest factoring service provider are as follows: 1. Relationship: At IFCI Factors Limited, we believe in proactively developing strong and lasting relationships with our clients, their buyers and our correspondent factors (for export factoring). We continuously endeavor to develop transaction structures that best meet the needs of our clients as well as their buyers. 2. Reliability: Being the pioneers in bringing International Factoring to India, we have had a rich experience of over fourteen years behind us which enables us to understand the needs of our clients in the context of their market and service them in the best possible way. 3. Flexibility: We provide innovative, customized solutions which are driven by a forward looking management style, sound understanding of the key credit issues and a thorough understanding of market practices. 4. Service Quality: A lean organisation structure supported by an internationally recognised top of the line software
platform ensures operational efficiency and translates into delivery of high quality services to customers. 1. Turnaround Time: IFCI Factors Limited prides itself in responding quickly to the demands of its customers, which in turn empowers them to capitalise on the attractive opportunities offered by an ever dynamic market. 2. Consistency: With a strong infrastructure and efficient operations, IFCI Factors Limited is able to maintain high service levels related to providing timely funding, follow up for collections, credit protection and management information. 5. Reasonable Charges: At IFCI Factors Limited, we recognise the importance of value for money. This means providing quality services at a reasonable and affordable cost. The factoring charges typically comprise of the following: 1. Discount Charge: This is levied at the month end based on actual fund utilisation by the client. 2. Service Charge: This is levied at a flat rate on the gross invoice value. It covers the cost of credit protection (where specified), sales ledger administration, processing and collections.
Purchase Bill factoring
As the name implies, Purchase Bill Factoring facilitates instant cash for purchases ,made at competitive rates and on flexible terms. It allows purchaser to bargain for cash terms, better quality and immediate delivery. Export Sales Bill Factoring For sales outside India. For your exports, International Factoring works to your advantage by providing you funding, credit assessment, credit protection and collection services. IFCI Factors Limited will help you enhance your competitiveness in the global market with overseas credit protection. We are a member of Factors Chain International (FCI), an organisation of factoring companies headquartered at Amsterdam, Netherlands. FCI boasts of more than 200 factoring companies in nearly 60 countries spread across the six continents. Our International network of correspondent factors go a long way in helping you to overcome all distance and language barriers and establish an easy flow of communication with your customers. Using EDI, the standard international electronic data interchange factoring network, IFCI Factors Limited gives you speedy and reliable reporting on your overseas customer accounts. Sharper Competitive Edge Entrusting your international accounts to us will provide you with the following benefits:
?
Commercial Credit Risk Management: IFCI Factors Limited facilitates open account trading without credit risk by arranging credit protection on agreed terms. In a highly competitive global market, this helps you to procure orders by
?
?
?
?
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offering more attractive terms to your customers. Overseas Payment Collection: IFCI Factors Limited follows up on payment through its network of Factors with your Customer (Buyer). Prompt Prepayments: We provide initial prepayment against your invoices at an agreed prepayment percentage with the balance being paid on receipt of payment from buyer. Sales Ledger Administration: IFCI Factors Limited maintains the sales ledger for its clients, monitoring the invoices raised and payments received and accordingly performs the necessary follow up for collections. We also provide you with valuable MIS to enable you to take better informed decisions related to pricing, credit terms, debtor quality and so on. Opportunity for Growth: The credit protection provided by IFCI Factors Limited enables you to build your business with international buyers (who are otherwise unwilling to open Letters of Credit) while keeping your credit exposures covered. Instant prepayments against your receivables provide you with the necessary resources required for funding your business growth. Advisory Services: IFCI Factors Limited also offers advisory services to its clients including credit assessment for its overseas buyers through its own network and that of its correspondent factors.
SBI Global Factors Limited (SBIGFL) is the only provider of international factoring, domestic factoring and forfaiting services under one roof in India. SBIGFL has established itself as a market leader in international factoring providing value added servicesto its clients. SBIGFL is headquartered in Mumbai with six regional offices - one each in New Delhi, Bangalore, Chennai, Hyderabad, Ahmedabad and Kolkata. SBIGFL aims to be the premier export and import solution provider in India offering professional quality services on an e-commerce platform. SBI Global Factors Limited (SBIGFL) formerly Global Trade Finance Ltd was promoted as a joint venture by Export Import Bank of India (Exim Bank), West LB, Germany; and International Finance Corporation (‘IFC’), Washington (the private sector arm of World Bank). It commenced its operations from September 2001. In March 2008, State Bank of India purchased the equity stake of Exim Bank, FIM Bank, Malta, and IFC, Washington and acquired 92.08% stake in the GTF. SBI Factors and Commercial Services Private Limited, a subsidiary of SBI promoted by SBI and its associates jointly with SIDBI & Union Bank of India in February 1991 was merged with the Company as per the order passed by the Hon’ble High Court, Mumbai dated 15/01/2010.The merged Company was renamed as SBI Global Factors Ltd. with effect from 23/03/2010. Post Amalgamation, State Bank of India holds 85.39% stake in SBIGFL. Remaining 14.61% is held by SIDBI, Bank of Maharashtra and Union Bank of India. SBIGFL is a member of Factors Chain International, a global association of international factoring
companies Established in 1968, FCI has played a major role in bringing factoring into most countries and today has a membership of 247 factoring companies operating in 66 countries. SBIGFL also has arrangements with credit insurers across the world for providing credit protection. International trade, on the basis of LC's is gradually declining. "Open Account" and "Extended Credit" is becoming a pre-requisite for increasing sales volume in global market. SBIGFL helps this need with its export factoring product that provides credit assessment, credit protection, financing, and collection services to exporters for regular sales on open account terms. SBIGFL uses a high end customized IT platform to process and deliver its services. With a short turn around time in approval of facilities. SBIGFL is the only factoring company in India to offer online web access to its clients for accessing their accounts. SBIGFL's "Client Access" module is custom made to suit its business profile and caters to client requirements.
Export Credit Guarantee Corporation of India Limited, was established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit. Being essentially an export promotion organization, it functions under the administrative control of the Ministry of Commerce & Industry, Department of Commerce, Government of India. It is managed by a Board of Directors comprising representatives of the Government, Reserve Bank of India, banking, insurance and exporting community. ECGC is the fifth largest credit insurer of the world in terms of coverage of national exports. The present paid-up capital of the company is Rs.800 crores and authorized capital Rs.1000 crores. What does ECGC do? Provides a range of credit risk insurance covers to exporters against loss in export of goods and services Offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan How does ECGC help exporters? ECGC Offers insurance protection to exporters against payment risks Provides guidance in export-related activities Makes available information on different countries with its own credit ratings
Makes it easy to obtain export finance from banks/financial institutions Assists exporters in recovering bad debts Provides information on credit-worthiness of overseas buyers Need for export credit insurance Payments for exports are open to risks even at the best of times. The risks have assumed large proportions today due to the far-reaching political and economic changes that are sweeping the world. An outbreak of war or civil war may block or delay payment for goods exported. A coup or an insurrection may also bring about the same result. Economic difficulties or balance of payment problems may lead a country to impose restrictions on either import of certain goods or on transfer of payments for goods imported. In addition, the exporters have to face commercial risks of insolvency or protracted default of buyers. The commercial risks of a foreign buyer going bankrupt or losing his capacity to pay are aggravated due to the political and economic uncertainties. Export credit insurance is designed to protect exporters from the consequences of the payment risks, both political and commercial, and to enable them to expand their overseas business without fear of loss.
Domestic Sales Bill factoring
For sales within India, Steps in Domestic Factoring:
1. 2. 3. 4. 5. 6. 7. 8. Customer ( Buyer) places the order with Client (Seller) Client (Seller) obtains a prepayment limit from IFCI Factors Limited Client (Seller) delivers goods/services to the customer (Buyer). Copies of Invoices, along with a Notice to Pay, are submitted to IFCI Factors Limited IFCI Factors Limited makes a prepayment advance to the Client IFCI Factors Limited follows up on payment with the Customer (Buyer) Customer (Buyer) makes payment to IFCI Factors Limited IFCI Factors Limited makes the balance payment to the Client (Seller), net of charges.
Multi Service Package At IFCI Factors Limited , the Domestic Factoring facility comprises of the following:
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Instant Prepayments: Advances are made to the client based on agreed prepayment percentages on submission of invoices. Balance payment is made on the receipt of payment from the buyer. Sales Ledger Administration: Under a domestic factoring agreement, IFCI Factors Limited manages and operates the Sales Ledger for the Clients, monitoring the invoices issued and payments received. IFCI Factors Limited also provides you with valuable MIS reports to enable you to take better informed credit and pricing decisions. Collection of Payments: IFCI Factors Limited follows up on payment with the Buyers (Seller’s Customer ) and makes the balance payment to its Client (Seller). Advisory Services: IFCI Factors Limited also offers advisory services to its clients such as credit assessment for domestic buyers.
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