All about factoring

‘Factoring’ is mainly a method of providing ‘Post Sale Finance. Apart from other services, we are very flexible in our operations once we fix the limits. We provide finance on book debts at very competitive rates & liberal credit period, to suit the requirements of our clients, with minimum formalities.

Factoring is financing for companies that have too much cash tied up in their commercial accounts receivable. By factoring, your company can immediately receive cash for accounts receivable instead of waiting 60 to 90 days or more, for your customers to pay. Instead of having your receivables tied up in the billing cycle, factoring allows your company to use that capital to grow, buy inventory, make payroll, take advantage of trade discounts…or anything else that demands your financial resources. Factoring is a simple and fast solution to a company’s cash flow needs.

Clients have instant access to their earnings and with the 'CASH FLOW' working smoothly; they can promptly settle their creditors, avail cash discounts and improve their profits.

Target group in terms of product line and turnover consist of high performers in their line of activity/their industrial segment, enjoying excellent market reputation.

Why you should avail ‘FACTORING’ SERVICE?

1. Finance generally upto 80-90% of the invoice value.
2. Sales ledger administration.
3. Debt collection service.
4. Advisory services.
5. Improvement of Balance Sheet ratios.
6. Finance beyond MPBF.
7. Extending more credit period.

Process

1. Buyer executes undertaking letter / indemnity in favor of CBF up to a certain limit. He also undertakes to make payment for the invoices accepted by him to CBF on the due dates.

2. Seller raises invoices on the Buyer who accepts in terms of UL / Indemnity.

3. Seller submits invoices accepted by the Buyer along with proof of delivery and a simple application to factor.

4. Factor makes payment to Seller who acknowledges for having received the payment.

5. On the due date Buyer makes payment to Factor.

There are two types of charges - Factoring charge and Discount charge.

a. Factoring charge is levied based on the work involved and services offered such as sales-ledger maintenance etc., calculated as a percentage of the gross value of invoices factored.  It may vary from 0. 10 % to 0.20 % depending on various factors. This is collected up-front from clients.

b. Discount charges are levied towards providing instant credit to the client by way of prepayment.  In this regard various aspects are taken into account, such as cost of funds, credit rating of the client, quality of transactions etc., while arriving at the rate.  This is collected on monthly basis on the actual drawings by the client from his pre-payment account.

 Nominal processing charge for the work relating to processing of the proposal.

Difference  Between  Bank and Factoring Services and Similarty