Non-Recourse Factoring

07/12/2022

Now that you have understood how Non-Recourse Factoring with India Factoring works and the benefits to your business, let us now find out how a Non-Recourse Factoring Facility is setup for you.

How is a Non-Recourse Factoring Facility set up? Is it a One-Time Facility or a Recurring Facility?

Non-Recourse Factoring Facility is a Recurring Facility. You will have to approach India Factoring and get a Limit on your Buyer. This is a recurring Limit. You continue giving invoices and India Factoring will continue purchasing Invoices up to this Limit. Also, there is no restriction to give only one Buyer. You can pick and choose multiple Buyers where you may need Factoring Facility. India Factoring will give separate Limits on each Buyer.

Can we give any Buyer of ours? Will India Factoring accept all our Buyers?

You need to give only those Buyers which fit the below criteria:

• You have Sales to your Buyers on Credit Terms
• The Sales to your Buyer is on Open Account Terms (Means no LC, Bill of Exchange, Cash on Delivery, etc.)
• It is your existing Buyer

India Factoring will then give you a Credit Limit on each Buyer. If there is any adverse news on the Buyer, you may not get a Limit or get a reduced Limit. In such cases, India Factoring will tell you of the refusal and you can then decide whether to reduce your Sales to the Buyer or stop the Sales to prevent any future loses – an important advisory

The Silver Lining of Factoring

You will appreciate from the above para that this is a major difference between obtaining a Financing Facility from a Bank vis-à-vis obtaining a Factoring Facility where the Factor looks beyond just Financing you – significant value-add!

Is there a Collateral taken by the Factoring Company?

The beauty of a Factoring Facility is that it is completely Unsecured. India Factoring does not take any collateral usually. So, you can use your collaterals to pledge it to the Banks for your other Financing needs like Long Term expansion, Pre-shipment Finance, Equipment Finance, etc.

Would we get the entire amount of an Invoice?

The answer is Yes. However on submission of an invoice you will be paid 80% to 90% of your Invoice (less charges of course) and the balance will be paid either when the buyer pays or at an agreed date after the due date if the buyer defaults.

Which Buyer Risks are covered?

India Factoring covers Bankruptcy and Protracted Default of your Buyer.

Does India Factoring require any Bill of Exchange?

No. There is no Instrument involved in Factoring. Financing is against an Invoice only.

What document required to be given along with the Invoice?

You would be required to provide Invoice and Proof or Dispatch or Proof of Delivery or Delivery Acknowledgement by Buyer along with all Statutory Documents required for Export Shipments.

Do I have to send my Export documents through my Bank?

No. You need to submit all Documents to India Factoring who will also take care of all your EDPMS, EBRC requirements.

 

Sounds too good to be true? Get in touch with India Factoring for more information and also wait for our next newsletter for more details.