DISCOUNTING,

FACTORING
&
FORFAITING
 GROUP MEMBERS

 Vrunda Surve 03

 Bhagyashri Gosavi 19

 Vaishali Kumbhar 21

 Prathamesh Shirodkar 32

 Manisha Jadhav 40
Introduction
 Factoring
Meaning
Functions of Factoring

 Purchase and collection of debts.

 Credit investigation and undertaking of credit risk.

 Provision of finance.

 Rendering Consultancy Services.

 Types of Factoring

• Full service factoring

• With resource factoring

• Maturity Factoring

• Bulk factoring

• Invoice factoring
• Agency Factoring

• International Factoring

• Suppliers Guarantee Factoring

• Limited Factoring

• Buyer Based Factoring

• Seller Based Factoring

1. Factoring is a broader term covering the entire trade debts of a client whereas
discounting covers only those trade debts which are backed by accounts
receivables.

2. Under factoring, the factor purchases the trade debt and thus becomes a holder for
value. But, under discounting the financier acts simply as an agent of his customer
and he does not become the owner.

3. The factors may extend credit without any recourse to the client in the event of non
– payment by customers, but discounting is always made with recourse to the
client.
4. Account receivables under discount are subject to rediscounting whereas it is not
possible under factoring .

5. Factoring involves purchase and collection of debts, management of sales ledger,

assumption of credit risk , provision of finance and rendering of consultancy
services. But discounting involves simply the provision of finance alone

6. Under discounting, the drawee is always aware of the banks’ charges with the
registrar of companies. In fact , factoring does not require such registration.

7. Bill financing through discounting requires registration of charges with the

Registrar of Companies. In fact, factoring does not require such registration.
BENEFITS
Financial Service

Collection Service

‘Credit risk’ Service

Provision of Expertise ‘Sales Ledger Management

Service’

Consultancy Service

Economy in Servicing

Off-Balance Sheet Financing

Trade Benefits

Miscellaneous Service
Factoring in India
INTERNATIONAL FACTORING
Types of Export Factoring

Two factor system

Single factor system

Direct Export factor system

Direct Import factor system

Forfaiting

Meaning

Factoring V/S Forfaiting

Benefits of Forfaiting

Profitable & Liquid

Simple & Flexible

Avoids Export Credit Insurance

Confidential & speedy

Fixed Rate Finance