Professional Documents
Culture Documents
On
Factoring
Submitted By:
Anjney Verma (PGP14009)
Jaideep Poonia (PGP
14074)
Kush Gupta (PGP 14027)
Group 6
Table Of Content
01
02
03
04
Group 6
What is Factoring?
Non
Recourse
Factoring
Recourse
Factoring
Advance and
Maturity
Factoring
Old Line
Factoring
Disclosed
Factoring
Undisclosed
Factoring
Cross
Border
Factoring
Group 6
Evolution of Factoring
In 1600s,
American
colonists seek
advance
payment on
raw materials
like timber,
tobacco and
cotton shipped
across Atlantic
to England.
In 1300s it
started in
England as a
form of
financing for
the clothing
merchants
In the 21st
century, with
the advent of
internet and
cloud based
platforms,
factoring has
become faster
and much more
accessible to
companies of
all sizes.
In 1990, major
banks and
financial giants
like GE Capital
and GMAC get
into factoring.
Smaller
factoring
companies
begin targeting
specific
industries
Group 6
Modus Operandi
The Client (Seller) sells goods to the Clients customer and prepares
invoice with a notation that debt due on account of this invoice is
assigned to and must be paid to the Factoring Company (Financial
Intermediary).
The Client (Seller) submits invoice copy only with Delivery Challan
showing receipt of goods by clients customer, to the Factoring
Company.
The Factoring Company, after scrutiny of these papers, allows
payment (advance, usually up to 80 percent of the invoice value). The
balance is retained as Retention Money (Margin Money). This is also
called Factor Reserve.
The drawing limit is adjusted on a continuous basis after taking into
account the collection of Factored Debts.
Once the invoice is honoured by the buyer on due date, the Retention
Money credited to the Clients Account.
Till the payment of bills, the Factor follows up the payment and sends
regular statements to the Client.
Group 6
Table Of Content
01
02
03
04
Group 6
Indian Scenario
PROBLEMS WITH
ACCEPTANCE
Lack of
awareness
Availability of
better options
Fake Bills
Few Debt
Recovery
platform
Cost of
transaction
Group 6
Major Players
SBI
Glo
bal
Fac
tor
Ltd
.
Can
Bank
Fact
ors
HS
BC
AXI
S
SBI Factor
AXIS
ICIC
I
EC
CG
Number of Services
Group 6
IFCI Factors
ICICI
Canbank
Factors
HSBC
Generalized
SIDBI
ECCG
Specialized
Group 6
Regulatory Framework
Regulatory Framework
Basic Law of
Transfer of
Receivables
1. Transfer of
Property Act
2. Stamp Laws
Regulatory Statutes
1. Factoring Act,
2011
2. RBIs guidelines
for factoring
companies
3. Basic regulatory
framework for
NBFCs.
Payment Mechanism
and certainty of
payment
1. Negotiable
Instruments Act
2. Payment and
Settlements law
3. MSME law
4. Foreign Exchange
Management, 1999
Group 6
Table Of Content
01
02
03
04
International Regulations
Group 6
International Regulations
In many countries there is no need for authorizations including UK, Czech Republic, The
Netherlands, Poland, Latvia, Slovakia, Switzerland, Luxembourg
USA has no Federal Government supervision but states have varying degrees of
supervision.
Full banking license with compliance with Basel rules France Other Regulations
Group 6
Degree of Regulations
Complete government supervision, regulation and licensing of all products and services
(China)
Full banking license issued by national central bank and compliance with Basel II (France)
Group 6
Table Of Content
01
02
03
04
Group 6
Gap Identification
Startup Factoring
Quick Cash is a
need for start-ups
Using the
promises by
investors and
clients to get short
term loans
Group 6
Suggestions
3
4
5
6
7
Group 6