Export Factoring in India

– Paving the way to provide easy finance to exporters

By Simran Jalan (simran@vinodkothari.com)

Introduction

Export factoring bundles together credit protection, export working capital financing, foreign accounts receivables bookkeeping and collection services- all in one product. It is the sale of foreign accounts receivable by a seller (exporter) to a factoring company at a discount, where the financier (factor) assumes the risk of default of the foreign buyer and handles collection on the receivables. The factor will purchase the accounts receivables or invoices, which are raised once the exporter ships the goods to the buyer (importer). Export financing is usually without recourse wherein the financier takes the payment risk of the importer.

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Growth of factoring services in India

-An analysis of the current scenario

By Simran Jalan (finserv@vinodkothari.com)

What is factoring?

Receivables form a major part of the current assets of a company and management of such receivables is the most important concern for the company. Factoring is a financial option for the management of receivables. It is a tool to obtain quick access to short-term financing and mitigate risks related to payment delays and defaults by buyers. In the process of factoring, the seller sells its receivables to a financial institution (“Factor”) at a discount. After the sale, there is an immediate transfer of ownership of the receivables to the factor. In the due course of time, either the factor or the company, depending upon the type of factoring, collects payments from the debtors. Factoring helps the company to improve the cash flows and cover the credit risk of the company. The following chart depicts the factoring process: Read more

Will GST provisions be a body blow to reverse factoring?, by Nidhi Bothra

Come midnight of 30th June, 2017, with the hitting of the gong, India will have its tryst begin with GST. The GST implementation and digging deeper into the provisions seemingly will go hand-in-hand. This article intends to discuss small proviso to the input credit availability provision in the Central GST Act (CGST Act) and its implications on trade financing. The nuances are worth the consideration and mulling. Read more

Impact of GST on factoring transactions

By Abhirup Ghosh, (gst@vinodkothari.com)

Factoring is a very popular product mode of working capital funding across the globe. In India, however, the picture is not quite rosy for factoring companies. Nevertheless, like every other thing in the country, factoring transactions will also be affected by the introduction of GST in India. Here in this article, we intend to walk you through the probable impact, GST would create on factoring transactions. Read more