Factoring Services in India
Quality services and the products business always have the scope to grow the business. It grows to an exponential level. While expanding the business, there is always a requirement for good resources and financial resources. When it comes to financial resources most businesses need working capital support. The working capital support without any collateral adds real value to the business. There are many financial instruments that work well for the working capital requirement. Factoring Service is one such financial instrument.
Traditionally, most of the working capital financial instruments are secured. Where you must have a mortgage on some kind of property with the financial institutions.
Earlier manufacturing and agriculture sectors were major contributors to the economy. However, over the period the Service sector has taken the major pie of Indian GDP. Thus, when it comes to the "Service sector or Industry", there are no fixes required by the businesses nor those created. The service sector industry always focuses more on creating intellectual capital than fixed assets. And intellectual property is not mortgaged by the Indian Debt Market to lend the fund to the businesses. There is always a gap for this.
About Factoring Services
Every business takes a particular number of days to convert its service or raw material to cash. And that is the reason every business needs the credit period, may it be a big or small business. And when the service or the raw material is sold on credit, that party becomes the debtor of the business. Factoring is the service where a business sells its debtors to the factoring company. So, generally, factoring companies take charge of the debtors and release the funds to the company. Thus, factoring is one of the best unsecured working capital instruments.
Parties Involved In Factoring Services
In the factoring process, there are three parties involved. One company (who sells the debtors), the second party is the Factor, (who purchases the debtors), and the third party is the client, (the debtor). The whole process of the factoring rotates among these three stakeholders of the process.
How do Factoring Services work?
Factoring is mainly useful where the customers (buyer) require the credit period and the company (seller) cannot afford to give the credit period. Let us say there are 3 parties – Company (Mr. A), Customer (as Mr. B), and Factor Limited (Mr. C). When Mr. A sells the goods or services to Mr. B, Mr. B agrees to pay Mr. A after 60 days from the date of invoice acceptance. Once Mr. B receives the invoice issued by Mr. A, Mr. B acknowledges the same to Mr. A. Mr. A conveys the same to Mr. C. Mr. C checks the authenticity of the invoice and makes the payment of 80% to 90% of the invoice amount to Mr. A. And remaining 10% to 20% will be transferred to Mr. A once Mr. B makes the full payment of the invoice to Mr. C.
There are many reasons why one should opt for factoring services. Below are a few of them –
- Unsecured Working Capital Funding
- Interest is charged only for the factoring duration.
- Low-Interest rate.
- No geo limits for factoring in the debtors. It can be worked out across the globe as well.
- Easy process to factor in the debtors.
- Long-term working capital solution.
- Can get the benefit of LIBOR+ Spread.
- Helps for instant liquidity to the business.
Understand the process of factoring funding from case study.
FAQs on Factoring Services
Need to mortgage anything for availing factoring service?
What is the factoring interest rate?
Can it be clubbed with other working capital facilities?
Need to change the existing banker?
Does factoring help international clients?
Does factoring help Indian Customers?
Factoring will disturb client credit terms?
How to avail of factoring services in India?
How Financiio Venture Helps in Factoring?
Financiio Venture is one of the professional and best investment banking firms in India that works for raising funds for businesses. Be it secured or unsecured funding. In factoring Financiio Venture understands the customer and checks the feasibility of how well factoring can suit your business. Once we analyze and confirm the feasibility of factoring, we search for the best suit factor for your debtors and execute the whole process smoothly. We do not factor in the debtors directly.
Financial instruments we arrange
Trade Finance Services
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