Trade Finance is our daily work and we are always available to support our client's needs. We are having our presence in global market .We have strong relationship in international banking system especially for trade finance, so we offer innovative and customized funding solutions for import and exports worldwide.
A trade finance mechanism whereby an exporter sells its export receivables (bills of exchange or promissory notes, or simply issued invoices, which the exporter is selling on an open account basis) at a discount. The company purchasing the receivables is called a factor. Factors are normally specialized financial services companies, but many are owned by banks. Normally, after the factor has purchased a receivable, the importer or buyer pays the factor directly. Some factors actually issue the invoices to buyers and, in effect, operate the exporter's sale ledgers. Some factors operate on a non-recourse basis i.e. they assume the risk of non-payment. Less frequently, the factor will take recourse to the exporter for all or part of the sums involved in the event of non-payment or delayed payment by the buyer.
We as a group can offer below mention types of Factoring as per the business modules of the Clients.
In this type of product up to 75 to 80 % of the value of the invoice will be consider for factoring. Interest will be charged from the date of advance to the date of collections. Factor does not participate in the credit sanction process. In India, factoring is done with recourse.
NON RECOURSE FACTORING
In this product credit risk lies with the factors. Factor purchases Receivables on the condition that the Factor has no recourse to the Client, if the debt turns out to be non-recoverable. Factor participates in credit sanction process and approves credit limit given by the Client to the Customer. This type of transactions happens only in overseas market.
The factor does not make any advance payment to the Client in this type of funding. Factoring company pays on guaranteed payment date or on collection of Receivables. Guaranteed payment date is usually fixed taking into account previous collection experience of the Client. As the name suggest, payment is to be made after the transit of goods.How Does Factoring Works
- You deliver goods or services to your client and raise an invoice.
- On an on-going basis, all such invoices of a pre-agreed buyer, along with supporting trade documents are assigned to India Factoring.
- India Factoring advances you a pre-payment as early as the next business day on receipt of such documents (subject to being in order).
- On settlement of the respective invoice by your buyer to India Factoring, the balance amount (if any) is credited to your account.
Forfeiting is a mechanism by which the right for export receivables of an exporter (Client) is purchased by a Financial Intermediary (Forfeiter) without recourse to him.
It is different from International Factoring in as much as it deals with receivables relating to deferred payment exports, while Factoring deals with short term receivables.
Exporter under Forfeiting surrenders his right for claiming payment for services rendered or goods supplied to Importer in favour of Forfeiter. Bank (Forfeiter) assumes default risk possessed by the Importer. Forfeiting is arrangement without recourse to the Exporter (seller). AD's Finance can arrange up to 80-100% of value (unlike in Factoring).
In recent years, forfeiting has assumed an important role for exporters who desire cash instead of deferred payments, especially from countries where protection against credit, economic and political risks has become more difficult.
Generally, the export receivables are guaranteed by the importer's bank. This allows the purchaser to discount "without recourse" to the exporter, thus taking the transaction off the exporter's balance sheet. This can have important benefits in terms of its positive effects on the exporting company's key financial ratios.
Typically the importer's obligations are evidenced by accepted bills of exchange or promissory notes which a bank avals - or guarantees by way of a "per aval" endorsement. The note are then said to be avalized. Equally the receivable may take the form of a term draft drawn under documentary letters of credit.
Forfeiting is also applied where the exporter is selling capital goods, and having to offer export finance up to five years. The forfeiter will then quote a price being a discount rate to be applied to the paper, calculated on the underlying cost of funds (LIBOR) plus a margin. It is usually possible to have a fixed price quoted for a shipment taking place up to six months forward, and the exporter is thus able to lock into his profit from the outset.