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Factoring Services

Domestic Factoring

  • Domestic Factoring is a process of factoring of accounts receivables generated out of sales within India. The Seller assigns to the Factor the accounts receivables arising out of sales to buyers within the country on open account terms and receives payment there against to the extent of 80-90% from the Factor, depending upon the credit terms.

Characteristics of Domestic Factoring Receivables:

  • The seller’s performance obligation should be completed before availing funding.

  • There should be a continuous sales flow on an ongoing basis with the same buyer or set of buyer(s).

  • Suited for credit terms of 30-180 days.

  • Transactions between two parties should be on ‘open account’ terms

  • Credit sales to a buyer to be assigned to SFO on a continuous basis, once the factoring arrangement is in place.

Export Factoring

Need for Export Factoring :

International Business poses various risks and challenges, like:

  • Risks arising out of non-payment, political risk, commercial risk, exchange control risks etc.

  • Difficulty to discover or understand the buyers’ financial situation.

  • Difficulty to understand the sovereign risks.

  • Lower realization in respect of sales against LCs inasmuch as the buyer is likely to deduct the cost of establishing LCs.

  • Difficulties due to uniqueness of each geography with respect to currency, banking system, local trade practices and legal system.

  • Customer's preference to trade in local currencies.

  • Resistance by most domestic banks to providing the necessary financing on export receivables, which arise out of trade on open account terms.

Here, Export Factoring provides an attractive alternative.

  • SFO covers credit risk of the exporter under Two Factor model of FCI. Under this model, there are four parties involved in a transaction: the exporter (seller), the domestic factoring company (viz. export factor), the foreign factoring company (viz. import factor) and the customer (buyer).

Dealership Factoring Facility

  • Dealership Factoring will be extended by SFO to the dealers (buyers) of industry majors (Seller) within India.

Features of Dealership Factoring Facility :

  • Dealership Factoring facility will be without recourse to the Seller. The facility will, however, become with recourse to the Seller, in case of any commercial or quality dispute between the Seller and the Buyer(Dealer ) or if the invoice is not accepted by the Buyer(Dealer).

  • SFO will consider sanction of Dealership Factoring facility to the dealers, based on strong recommendations of the Seller (Industry major) by way of a comfort letter , backed by tripartite agreement.

Vendor Factoring Facility

  • In today’s scenario, many of the manufacturing companies outsource their component manufacturing /services with a view to maintain cost effectiveness, inventory management, etc.
  • Vendor Factoring Facility introduced by SFO helps Vendors from SME/MSME sector.

Features of Vendor Factoring Facility :

  • Vendor Factoring Facility will be extended by SFO to small players in the market, supplying to those corporates having strong financials/external credit rating.

  • The facility is primarily extended to ‘Vendors’ with the ‘Buyer’ (usually an Industry Major) undertaking to settle the dues on the due date.

  • The Facility sanctioned to the ‘Vendors’ will be ‘With Recourse’ to them. The primary liability to pay the invoices factored by SFO will be that of the ‘Buyer’

Discounting of Domestic (Sales / Purchase) & Export (Sales) Bills Under Letter of Credit

  • The facility will be extended for both domestic and export transactions under Letters of Credit opened by First Class banks. The disbursement under these LC backed facilities will always be done by SFO after satisfying the genuineness of the LC and acceptance/ confirmation by the opening/ paying banks of documents being in order.

Features of LC Bill Discounting Facilities :

  • SFO provides finance upto 100% of LC value to the seller

  • SFO maintains records relating to accounts receivables (A/R) under LC transactions.

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