Factoring

Quality services and the products business always have the scope to grow the business and it grows to the exponential level. While expanding the business there is always a requirement of good resources, financial resources are important among them. When it comes to financial resources most of the businesses need working capital support. And the working capital support without any collateral adds the real value to the business.

 

There are many financial instruments which work well for the working capital requirement. Traditionally, most of the working capital financial instruments were secured one, where you must have to mortgage 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. When it comes to the “Service sector or Industry” there are no fixes required by the businesses neither those are created. Sector sector industry always focuses more on creating the intellectual capital than the fixed assets. And intellectual property is not mortgaged by Indian Debt Market to lend the fund to the businesses. There is always a gap for this.

Factoring Details

  • What Is Factoring?

Every business takes a particular number of days to convert their service or raw material to cash. And that is the reason every business needs the credit period, may it big or small business. And when the service or the raw material 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. Generally, factoring companies take a charge on the debtors and release the funds to the company. Factoring is one of the best unsecured working capital instruments.

  • Parties Involved In Factoring…

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 (debtor). The whole process of the factoring rotates among these three stakeholders of the process.

  • How does Factoring works?

Factoring is mainly useful where the customers (buyer) requires the credit period and the company (seller) cannot afford to give the credit period. Let us say there are 3 parities – 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 Mr. A once Mr. B makes the full payment of invoice to Mr. C.

  • Why Factoring?

There are many edges why one should opt for factoring services. Below are few of them –

  • Unsecured Working Capital Funding
  • Interest is charged only for the factoring duration.
  • Low Interest rate.
  • No geo limits for factoring the debtors. It can be worked out across the globe as well.
  • Easy process to factor the debtors.
  • Long term working capital solution.
  • Can get the benefit of LIBOR+ Spread.
  • Helps for instant liquidity to the business.
  • How Terkar Capital Helps in Factoring?

Terkar Capital is one of the professional and best investment banking firms in India which works for raising funds for businesses. Be it secured or unsecured funding. In factoring Terkar Capital understands the customer and checks the feasibility of how well factoring can suit your business. Once we analyse and confirm the feasibility of factoring, we search the best suit factor for your debtors and execute the whole process
smoothly. We do not factor the debtors directly.

  • Factoring FAQs
  • Need to mortgage anything for availing factoring service?
    No. The factoring service does not require any kind of fixed asset to be mortgaged. So this helps all kinds of industries. Capital and Non-capital intensive industries.
  • What is the factoring interest rate?
    The rate of interest varies as the geo limit. For domestic factoring, the rate of interest will be around 10-12% pa. And for the international client, the rate of interest can be around 4-6% pa (LIBOR+Spread)
  • Can be clubbed with other working capital facilities?
    Generally, under CC always there is a charge on the debtors of the company. However, under factoring, factor can take the opinion from the existing core banker and can factor the debtors. So factoring can be clubbed with any working capital facilities you have opted for.
  • Need to change the existing banker?
    No there is no any such requirement or obligation to change the existing banker.
  • Factoring helps for international clients?
    Yes. In fact you will get more benefits for international clients, as you will get the exposure to LIBOR+Spread (generally this will be around 3-5% pa)
  • Factoring helps to Indian Customers?
    Yes. In fact you will get more benefits for international clients, as you will get the exposure to LIBOR+Spread (generally this will be around 3-5% pa)
  • Factoring will disturb client credit terms?
    No. Under factoring, there are no changes in the payment terms. There are only a few changes like the account where to transfer the funds. So there are no disturbances to the credit terms between you and the client.
  • How to get factoring services?
    Though the factoring service is complex in nature, you do not have to worry about this. You just have to contact Terkar Capital and they will take care of end to end execution of the whole process. Terkar Capital is the best investment firm in India, works professionally for raising the debt finance for the companies. They understand the complex structure of the company including working capital cycles, statutory compliances and legal complications.

For More Details Please contact our Experts

If you have any questions, please do not hesitate to ask us. Please also call us or email us before visiting to make sure that you will be served with our best services.

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