3. Factoring is a financial
transaction in which a
business sells
its accounts
receivable (i.e., invoices)
to a third party (called
a factor) at a discount.

4. Factoring

5. • Usually the period for factoring
is 90 to 150 days. Some factoring
companies allow even more than
150 days.
• Factoring is considered to be a
costly source of finance
compared to other sources of
short term borrowings.
• Factoring receivables is an ideal
financial solution for new and
emerging firms without strong
financials.
• Bad debts will not be considered
for factoring.
• Credit rating is not mandatory.
NATURE OF
FACTORING

6. • Disclosed and Undisclosed
• Recourse and Non recourse
• Domestic Factoring
• Overseas (Export) Factoring
• Revocable and Irrevocable
Export Factoring
• With/Without Notice Factoring
DIFFERENT TYPES
OF FACTORING

7. • Bill discounting is always of recourse type while
factoring can be either with or without recourse.
• Factoring is an off balance sheet entry in the
sense that both amount of receivables and bank
credit are not shown in the balance sheet which is
not the case with the bill discounting.
• Discounted bills may be re-discounted several
times before they mature for payment which is
not the case with factoring.
Differences between Factoring and Bill
Discounting