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    Indian Financial System

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    Vyshnav es
    Factoring is a financial transaction where a business sells its accounts receivable to a third party at a discount in order to obtain immediate cash flow. Factors provide back office support like collections and assume the risk of the client's customers. While factoring provides liquidity and reduces risks, it can be costly for the seller and funding may be withdrawn if buyers refuse to pay. Factoring is best for businesses that need cash flow but should only be used after carefully considering needs and risks.

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    Indian Financial System

    Uploaded by

    Vyshnav es
    34 views9 pages
    Factoring is a financial transaction where a business sells its accounts receivable to a third party at a discount in order to obtain immediate cash flow. Factors provide back office support like collections and assume the risk of the client's customers. While factoring provides liquidity and reduces risks, it can be costly for the seller and funding may be withdrawn if buyers refuse to pay. Factoring is best for businesses that need cash flow but should only be used after carefully considering needs and risks.

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    Factoring is a financial transaction where a business sells its accounts receivable to a third party at a discount in order to obtain immediate cash flow. Factors provide back office support like collections and assume the risk of the client's customers. While factoring provides liquidity and reduces risks, it can be costly for the seller and funding may be withdrawn if buyers refuse to pay. Factoring is best for businesses that need cash flow but should only be used after carefully considering needs and risks.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    34 views9 pages

    Indian Financial System

    Uploaded by

    Vyshnav es
    Factoring is a financial transaction where a business sells its accounts receivable to a third party at a discount in order to obtain immediate cash flow. Factors provide back office support like collections and assume the risk of the client's customers. While factoring provides liquidity and reduces risks, it can be costly for the seller and funding may be withdrawn if buyers refuse to pay. Factoring is best for businesses that need cash flow but should only be used after carefully considering needs and risks.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 9

    INDIAN FINANCIAL SYSTEM

    TOPIC:FACTORING
    INTRODUCTION

     Factoring is a financial transaction in which a business sells its accounts receivable to a third party at a discount. It
    is mainly done to meet it's present and immediate cash needs. Forfaiting is a factoring arrangement used in
    international trade finance by exporters who wish to sell their receivables to a forfeiter.
    CHARACTERISTIC FEATURE

    • Factors provide free back-office support, including managing collections from your customers. This gives you more time
    and resources to focus on growing your company.

    • Factoring is based on the quality of your customers’ credit, not your own credit or business history.

    •  Factoring can be customized and managed so that it provides necessary capital when your company needs it.  Factoring
    is not a loan, so you do not incur debt when you factor.

    • The factor takes over the risk burden of the client and thereby the client’s credit is covered through advances. Case
    advances: The factor makes cash advances to the client within 24 hours of receiving the documents.
    OBJECTIVES OF THE TOPIC

    • Good vision foster long term thinking.

    • Good vision foster risk-taking and experimentation.

    • To provide a basis for motivating the use of the organizations resources.

    • To develop a basis, or standard, for allocating organizational resources.

    • To establish a general tone or organization climate. Good vision help in the creation of a common identity and a shared
    sense of purpose.

    • Good visions are competitive, original and unique.


    ADVANTAGES

    •  Cost saving

    • Liquidity

    • Cash flow

    • Credit certification

    • Information flow
    DISADVANTAGES

    • High risk for both the seller and Factor

    • Costly process for seller

    • Buyers may refuse to pay back

    • Misleading of funds
    BENEFITS

    Invoice Factoring: 5 Benefits for Small Businesses Learn how factoring receivables can help your small business get cash in
    less time than you might think.

    •  Simple application process 

    •  Get Your Money Fast

    •  Use the Money How You Want 

    • Outsource Your Collections 

    •  Customer Service Oriented


    CONCLUSION

    Although factoring offers many merits to the seller, it cannot be said to be the perfect source of finance for businesses. A
    person should carefully assess the business needs and the present situation which warrants the need for funds. Taking a
    factoring advance without proper consideration may adversely affect the business profitability and customer relations.
    BIBLIOGRAPHY

    • https://efinancemanagement.com/sources-of-finance/factoring
    • https://www.yourarticlelibrary.com/economics/factoring-silent-features-types-steps-advantage-and-limitations/23514
    • https://www.preservearticles.com/articles/8-most-important-types-of-factoring/26923

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