Professional Documents
Culture Documents
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Overcome the situation from high cost of capital and reduced profit
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Factoring functions..
It is purchasing & collection the clients a/cs receivables (with or without recourse), Sales Ledger management Credit investigation & undertaking of risks Provision of finance against debts Rendering consultancy services
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Customer pays
Factor-Prepayment Monthly statements Factor
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Funding Process
Fax the copy of invoice to factor Factor processes the invoice Get up to 80% of the invoice in 24 hours 20% kept in reserve account Factor receives the payment from customer Factor deducts fee from reserve account Factor forwards the balance from reserve
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Maturity Factoring
Collection Factoring Paid to clients only when factor gets money
Bulk Factoring
Disclosed Factoring Provides Finance after disclosing the fact of assignments
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Invoice Factoring
Only provides finance against invoices All other works have to be done by clients
Agency Factoring
Factor and Client share the work The Factor has to provide finance and assume risk
International Factoring
Done with exporters Facilitated with the help of export factor and import factor
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Benefits Of Factoring
Financial Services 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
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Forfait is derived from French word a forfait which means forfeiting or surrender of rights It is a mechanism of financing exports
by discounting export receivables evidenced by Bills of Exchange or Promissory Notes without recourse to the seller (viz exporter) carrying medium to long term maturities on a fixed rate basis (discount) upto 100 per cent of the contract value
What is Forfaiting ?
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Forfaiting..
It is a highly flexible technique that allows an Exporter to grant attractive credit terms to foreign Buyers, without tying up cash flow or assuming the risks of possible late payment or default. Simultaneously, the Exporter is fully protected against interest and/or currency rates moving unfavourably during the credit period Forfaiting is a highly effective sales tool, which simultaneously improves cash-flow and eliminates risk.
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Forfaiting : 8 Steps
1. 2. 3. 4. 5. 6. 7. 8. Commercial contract : Exporter & Foreign Buyer Commitment to Forfait BE , Pro Notes Delivery of Goods by Exporter to Buyer Delivery of BE / PN to Bank to EXIM Bk Endorsement of BE / PN without recourse Cash Payment/ thro a Nostro Account Presentation of BE / PN to Buyer on maty Payment of Debt Instrument on maturity
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Converts a Deferred Payment export into a cash transaction, improves liquidity Frees Exporter from cross-border political or commercial risks associated Finances upto 100 percent of export value It is a Without Recourse finance Hedges against Interest and Exchange Risks
Benefits to Exporters
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Drawbacks of forfaiting
Non-availability for short Periods Non-availability for financially weak countries Dominance of western currencies Difficulty in procuring international banks guarantee
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Thank You
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