Factoring Services Ppt
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FACTORING SERVICES
SBI FACTORS & COMMERCIAL SERVICES PVT. LTD.
WELCOMES YOU ALL
SBI
FACTOR
S
AND COMMERCIAL SERVICES LTD.
PRESENTS
THE “ KASHflo ” SOLUTION
0% on re
alis atio n
Payment to Factor
Sends invoices to customer
FACTOR Bal anc e2
Prepayment up to 80%
Assigns invoice to Factor
CLIENT
Statement to customer
CUSTOMER
INDUSTRIES THAT CAN BE COVERED BY FACTORING
Small Scale Industries with growth potentials Medium Scale Industries Service Industries
Factoring is a financial service covering the financing and collection of accounts receivables in domestic as well as in international trade. Basically, factoring is an arrangement in which receivables on account of sale of goods or services are sold to the factor at a certain discount.
As the factor gets the title to the receivables on account of the factoring contract, factor becomes responsible for all credit control, sales ledger administration and debt collection from the customers.
Any of the two services to be provided
The following services to be provided by the factor; I) finance, (ii) maintenance of accounts, (iii) collection of debts and (iv) protection against credit risk.
FACTORING V/S BILLS DISCOUNTING
THE MAJOR DIFFERENCE BETWEEN THE TWO IS THAT BILLS DISOUNTING IS ALWAYS WITH RECOURSE, WHEREAS FACTORING MAY BE WITH OR WITHOUT RECOURSE.
Bill Discounting 1. Individual Transaction.
2. Each bill has to be individually accepted by the drawee. This takes time. 3. Stamp duty is charged on certain usance bills together with bank charges. It proves very expensive
Factoring 1. Whole turnover basis.This also gives the client the liberty to draw desired finance only. 2. A one time notification is taken from the customer at the commencement of the facility. 3. No stamp duty is charged on the invoices. No charges other than the usual finance and service charge.
Bill Discounting 4. More paperwork is involved. 5. Grace period for payment is usually 3 days. 6. Original documents like MTR, RR, Bill of Lading are to be submitted. 7. Charges are normally up front.
Factoring 4. No such paperwork is involved. 5. Grace period are far more generous. 6. Only copies of such documents are necessary. 7. No up front charges. Finance charges are levied on only the amount of money withdrawn .
Buyer negotiates terms of purchasing the material with the seller. Buyer receives delivery of goods with invoice and instructions by the seller to make payment to factor on due date
Buyer makes payment to factor in time or gets extension of time or in the case of default is subject to legal process at the hands of the factor
Seller MoU with the buyer in the form of letter exchanged between them or agreement Sells goods to the buyer as per MoU/agreement
Delivers copies of invoice, delivery challan, MoU, instructions to make payment to factor given to buyer.
Seller receives 80 percent or more payment in advance from factor on selling the receivables from buyer to factor. Seller receives balance payment from factor after deduction of factor’s service charges, etc .
Parties to factoring – client, customer and factor. Cost of factoring Service fee (for administrating the sales ledger as well as protection against bad debts – as a percentage of invoice value or number of invoices) Discount charges (advance provided by factor and is interest which is PLR plus or minus)
In bill discounting drawer undertakes the responsibility of collecting the bills and remitting the proceeds to financing agency, whereas a factor usually undertakes to collect the bills of the client
Bill discounting facility implies only provision of finance but a factor also provides other services like sales ledger maintenance and advisory services
Discounted bills may be rediscounted several times before they mature for payment. Debts purchased for factoring cannot be rediscounted, they can be refinanced .
Factoring implies the provision of bulk finance against several unpaid trade generated invoices in batches, bill financing is individual transaction-oriented – each bill is separately assessed and discounted
Factoring is an off-balance mode of financing. Bill discounting does not involve assignment of debts as is the case with factoring.
Problem 1 - Your buyer’s credit risk. Will your buyers pay you on time? If they fail to pay or become insolvent, will your company be able to afford this type of loss?
Problem 2 - Your company lacks cash flow. Your company sells on open account. You end up waiting many days or more often months before you are paid. Your business will soon find itself short of working capital.
Problem 3 - Managing your sales ledger. Your company has many customers. Managing all of these buyer accounts consumes an every growing amount of time, energy and resources.
Problem 4 - Collecting your payment. When your invoices get past due, you must allocate precious time to collecting the funds you are owed.
By utilizing accounts receivables factoring services your company will enjoy the following benefits: Trade financing Credit risk control and bad debt protection Management of sales ledger Relief from collection headaches
Easy finance - by simply providing copies of your documents and invoices that show you have delivered the goods and your company will then get trade finance and other services of your choosing. More credit sales will result in more finance for your company.
Low cost - compared to working capital loans and under factoring the finance period is much more flexible. Using our business invoice factoring services, your company can: Save significant interest expenses. Outsource management of your sales ledger. Divert human resources to more productive work.
Market expansion - using our business invoice factoring services, your company will become more competitive and gain a larger market share because you will not have to fear granting credit to your buyers.
Profit increase - when you have an expanded market share, a risk protection program in place, enough cash flow to fund your growth, you are sure to multiply your profits.
THANK YOU
Our products: REGULAR FACTORING FACILITY (RFF) PURCHASE BILL FACTORING FACILITY (PBF) EXPORT FACTORING FACILITY (EFF) OPEN ACCOUNT RECOURSE FACTORING (OARF)
SBI FACTORS & COMMERCIAL SERVICES PVT. LTD.
WELCOMES YOU ALL
SBI
FACTOR
S
AND COMMERCIAL SERVICES LTD.
PRESENTS
THE “ KASHflo ” SOLUTION
0% on re
alis atio n
Payment to Factor
Sends invoices to customer
FACTOR Bal anc e2
Prepayment up to 80%
Assigns invoice to Factor
CLIENT
Statement to customer
CUSTOMER
INDUSTRIES THAT CAN BE COVERED BY FACTORING
Small Scale Industries with growth potentials Medium Scale Industries Service Industries
Factoring is a financial service covering the financing and collection of accounts receivables in domestic as well as in international trade. Basically, factoring is an arrangement in which receivables on account of sale of goods or services are sold to the factor at a certain discount.
As the factor gets the title to the receivables on account of the factoring contract, factor becomes responsible for all credit control, sales ledger administration and debt collection from the customers.
Any of the two services to be provided
The following services to be provided by the factor; I) finance, (ii) maintenance of accounts, (iii) collection of debts and (iv) protection against credit risk.
FACTORING V/S BILLS DISCOUNTING
THE MAJOR DIFFERENCE BETWEEN THE TWO IS THAT BILLS DISOUNTING IS ALWAYS WITH RECOURSE, WHEREAS FACTORING MAY BE WITH OR WITHOUT RECOURSE.
Bill Discounting 1. Individual Transaction.
2. Each bill has to be individually accepted by the drawee. This takes time. 3. Stamp duty is charged on certain usance bills together with bank charges. It proves very expensive
Factoring 1. Whole turnover basis.This also gives the client the liberty to draw desired finance only. 2. A one time notification is taken from the customer at the commencement of the facility. 3. No stamp duty is charged on the invoices. No charges other than the usual finance and service charge.
Bill Discounting 4. More paperwork is involved. 5. Grace period for payment is usually 3 days. 6. Original documents like MTR, RR, Bill of Lading are to be submitted. 7. Charges are normally up front.
Factoring 4. No such paperwork is involved. 5. Grace period are far more generous. 6. Only copies of such documents are necessary. 7. No up front charges. Finance charges are levied on only the amount of money withdrawn .
Buyer negotiates terms of purchasing the material with the seller. Buyer receives delivery of goods with invoice and instructions by the seller to make payment to factor on due date
Buyer makes payment to factor in time or gets extension of time or in the case of default is subject to legal process at the hands of the factor
Seller MoU with the buyer in the form of letter exchanged between them or agreement Sells goods to the buyer as per MoU/agreement
Delivers copies of invoice, delivery challan, MoU, instructions to make payment to factor given to buyer.
Seller receives 80 percent or more payment in advance from factor on selling the receivables from buyer to factor. Seller receives balance payment from factor after deduction of factor’s service charges, etc .
Parties to factoring – client, customer and factor. Cost of factoring Service fee (for administrating the sales ledger as well as protection against bad debts – as a percentage of invoice value or number of invoices) Discount charges (advance provided by factor and is interest which is PLR plus or minus)
In bill discounting drawer undertakes the responsibility of collecting the bills and remitting the proceeds to financing agency, whereas a factor usually undertakes to collect the bills of the client
Bill discounting facility implies only provision of finance but a factor also provides other services like sales ledger maintenance and advisory services
Discounted bills may be rediscounted several times before they mature for payment. Debts purchased for factoring cannot be rediscounted, they can be refinanced .
Factoring implies the provision of bulk finance against several unpaid trade generated invoices in batches, bill financing is individual transaction-oriented – each bill is separately assessed and discounted
Factoring is an off-balance mode of financing. Bill discounting does not involve assignment of debts as is the case with factoring.
Problem 1 - Your buyer’s credit risk. Will your buyers pay you on time? If they fail to pay or become insolvent, will your company be able to afford this type of loss?
Problem 2 - Your company lacks cash flow. Your company sells on open account. You end up waiting many days or more often months before you are paid. Your business will soon find itself short of working capital.
Problem 3 - Managing your sales ledger. Your company has many customers. Managing all of these buyer accounts consumes an every growing amount of time, energy and resources.
Problem 4 - Collecting your payment. When your invoices get past due, you must allocate precious time to collecting the funds you are owed.
By utilizing accounts receivables factoring services your company will enjoy the following benefits: Trade financing Credit risk control and bad debt protection Management of sales ledger Relief from collection headaches
Easy finance - by simply providing copies of your documents and invoices that show you have delivered the goods and your company will then get trade finance and other services of your choosing. More credit sales will result in more finance for your company.
Low cost - compared to working capital loans and under factoring the finance period is much more flexible. Using our business invoice factoring services, your company can: Save significant interest expenses. Outsource management of your sales ledger. Divert human resources to more productive work.
Market expansion - using our business invoice factoring services, your company will become more competitive and gain a larger market share because you will not have to fear granting credit to your buyers.
Profit increase - when you have an expanded market share, a risk protection program in place, enough cash flow to fund your growth, you are sure to multiply your profits.
THANK YOU
Our products: REGULAR FACTORING FACILITY (RFF) PURCHASE BILL FACTORING FACILITY (PBF) EXPORT FACTORING FACILITY (EFF) OPEN ACCOUNT RECOURSE FACTORING (OARF)
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