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Factoring and Forfaiting Services
#1
Factoring : factoring is a service that is concerned with the financing and collection of account receivables in domestic and international trade. it is an ongoing arrangment between the client and factor (usually a bank or a financial institution ),where invoices raised on open acccount sales of goods and services are regularly assigned to ' the factor ' for financing , collection and sales ledger administration. it is a long term reletionship between buyer and seller.

two type of foctoring services
1. recourse factoring (with recource )
1. non recource factoring ( without recource)

In recource factoring, in the case of non payment of invoices by customers, the factor will recover the amount advanced from the client.
In non recource factoring , the factor provides both finance and credit protection.

Domestic factoring : under domestic factoring,receivables arising only out of domestic trade shall be considered for factoring.

under domestic factoring, the payment of the billes that the seller gets from the factor is nearly 80 % of the bill amount

International factoring : in international factoring there are usually two factors. the export factor looks at financing the exporter and sales administration .

International factoring encompasses all the four services

1. pre payement
2. sales ledger administration
3. credit protection
4. collection

Forfaiting services : forfaiting is a means of finance (credit) an exporter of goods avails from an intermediary called the forfaiter against the export receivables but without the obligation to repay the credit.
forfaiting is used for international trade transaction
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