FACTORING

FACTORING

INTRODUCTION:

                                  Factoring is a means of finance in which client (seller of goods/service) sale their receivables to factor in exchange of money.

                               The study group appointed by the International Institute for the Unification of private law (UNIDROIT), Rome, during 1988, recommended, in general term, the definition of factoring as under:

                                “Factoring means an arrangement between a factor and his client which includes at least two of the following services to be provided by the factor:

ð  Finance.

ð  Maintenance of debt.

ð  .Collection of debt.

ð  Protection against credit risk.

Function of a factor:

                                         Factor is a financial intermediary who provides various assistance in the factoring arrangement. The function of a factor could be classified into five categories:

1.       Maintenance and administration of sales ledger.

2.       Factors undertake the responsibility of collection of receivables.

3.       Financing the trade debts.

4.       Credit control and credit protection.

5.       Advisory  services.