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