Factoring

Factoring

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Factoring

Companies sometimes need cash before customers pay their account balances. In such situations, the company may choose to sell accounts receivable to another company that specializes in collections. This process is called factoring.

  • This form of financing (also known as Invoice Factoring) is a financial tool that allows businesses to capitalize on the power of their outstanding Accounts Receivable.
  • Factoring is a valuable mechanism to turn a business' invoices into immediate cash, enabling them to fund business operations.

STEP 1: When you make credit sales to your customers, an invoice is raised and acknowledged by your customer.
E.g. Rs. 2 Crore Sale for 90 day credit period

STEP 2: The bills are submitted to us, and we obtain the Bill Discounting limits, for upto 90% of the bill amount, through the Banker / NBFC.
E.g. Rs. 1.8 Crore is given to you at the beginning of the credit period

STEP 3: At the end of the credit period, the Banker/NBFC collects the debt (i.e. Rs. 2 Crore) directly from your customer.

STEP 4: The remaining amount (i.e. Rs. 0.2 Crore ) is returned you, less the factoring fees.
This form of borrowing is purely unsecured.

The Bill Discounting Limits can be rolled over repeatedly throughout the year.
Eg. Rs. 2 Crore for 90 Days credit period can be rolled over 4 times in one year, therefore Rs. 8 Crore for 1 year.

The rate of interest will be determined based on your credit profile as well as the credit profile of your customer.
At Brooklynn India, you can discount your bills at the lowest rates in the market.

Export Bill Discounting/Post-Shipment Finance:

When an exporter requires cash, before the payment from overseas client(s) is/are realised, Export Bill Discounting is the best option.

Export Bills can be discounted at international rates, i.e. at LIBOR (London Inter-Bank Offer Rate), making it a very cost effective source of finance.