DISCOUNTING, FACTORING & FORFAITING

GROUP MEMBERS

Vrunda Surve 03

Bhagyashri Gosavi 19

Vaishali Kumbhar 21

Prathamesh Shirodkar 32

Manisha Jadhav 40

Introduction

Factoring Meaning

Functions of Factoring Purchase and collection of debts.

Credit investigation and undertaking of credit risk.

Provision of finance.

Rendering Consultancy Services.

Types of Factoring

• Full service factoringFull service factoring

• With resource factoringWith resource factoring

• Maturity FactoringMaturity Factoring

• Bulk factoringBulk factoring

• Invoice factoringInvoice factoring

• Agency FactoringAgency Factoring

• International FactoringInternational Factoring

• Suppliers Guarantee FactoringSuppliers Guarantee Factoring

• Limited FactoringLimited Factoring

• Buyer Based FactoringBuyer Based Factoring

• Seller Based FactoringSeller Based Factoring

1. Factoring is a broader term covering the entire trade debts of a client whereas discounting covers only those trade debts which are backed by accounts receivables.

2. Under factoring, the factor purchases the trade debt and thus becomes a holder for value. But, under discounting the financier acts simply as an agent of his customer and he does not become the owner.

3. The factors may extend credit without any recourse to the client in the event of non – payment by customers, but discounting is always made with recourse to the client.

4. Account receivables under discount are subject to rediscounting whereas it is not possible under factoring .

5. Factoring involves purchase and collection of debts, management of sales ledger, assumption of credit risk , provision of finance and rendering of consultancy services. But discounting involves simply the provision of finance alone

6. Under discounting, the drawee is always aware of the banks’ charges with the registrar of companies. In fact , factoring does not require such registration.

7. Bill financing through discounting requires registration of charges with the Registrar of Companies. In fact, factoring does not require such registration.

BENEFITS Financial Service

Collection Service

‘Credit risk’ Service

Provision of Expertise ‘Sales Ledger Management Service’

Consultancy Service

Economy in Servicing

Off-Balance Sheet Financing

Trade Benefits

Miscellaneous Service

Factoring in IndiaFactoring in India

INTERNATIONAL FACTORING

Types of Export FactoringTypes of Export Factoring

Two factor system

Single factor system

Direct Export factor system

Direct Import factor system

Forfaiting

Meaning

Factoring V/S Forfaiting

Benefits of Forfaiting

Profitable & Liquid

Simple & Flexible

Avoids Export Credit Insurance

Confidential & speedy

Fixed Rate Finance