What's New?

SPEEDY Railway Book (English)

Details about Factoring - Advantages and Functions

Details about Factoring - Advantages and Functions for IBPS PO, IBPS CLERK, INSURANCE EXAMS, RRB OFFICER SCALE 1, RRB ASSISTANT, SBI PO, SBI CLERK


Essential for All Upcoming Bank Exams
The arrangement in which short-term domestic receivables on the sale of goods or services are sold to a company (known as FACTOR), is called, factoring which was introduced during 1991 on the Report of Kalyanasundrama Committee.

The FACTOR performs the functions such as –
  • Submitting sales account to the creditors; 
  • Purchase of Receivables; 
  • Collection of debt on due dates; 
  • Maintaining the sales account to the creditors; 
  • After collection, to return the reserve money to the seller and provide consultancy services to the customer. 
Advantages of Factoring: 
  • Dealers also get rid of the receivables collection. 
  • Sales are virtually in cash sales. 
  • Its functional capital management achieves efficiency, which reduces its costs and improves the chances of good profit. 
  • Money available with the lenders is available for business. 
The process of Factoring:
  • FACTOR recovers the amount from a buyer on the due date. 
  • Seller discounts these receivables with a FACTOR by assigning the receivables. 
  • Seller sells goods on a short-term credit basis. 
  • FACTOR purchases the receivable on with or without recourse basis. 
  • Buyer accepts the bills raised by the seller. 
With or without recourse:
If non-payment loss is borne by the factor it is called without recourse factoring. If risk can be transferred back to the seller, it is called with recourse factoring.
Join Your Competitor in FB Groups
Join Your Competitor in Telegram Groups
Study Materials and Important Notifications
Latest Govt. Schemes Monthly PDF Download
Newsletters Form

  • Comments
  • Google+
  • Disqus