Although factoring as a service has been around for a long time in India, it has only recently started gaining popularity as an alterntive to traditional ways of securing finance against trade payables. A factoring service is an arrangement wherein a company simply sells their trade receivables to a third party financial institution or a bank (the factor), this is also why it is popularly referred to as a Bill Purchase Solution. The first factoring solution was introduced in 1991 by SBI Global factors. Today, however, trading and manufacturing companies can choose between several bank and non-bank entities for their factoring requirements
As opposed to traditional ways of securing working capital finance, bill factoring or invoice factoring solutions have a few distinct advantages. Firstly, they're much quicker. Growing companies in India can expect disbursements directly into their account in a currency of their choice within as little as 24-48 hours. Secondly, since a factoring solution involves a direct transfer of risk to the factoring company, its far less risky for the seller who can focus on the core areas of the business instead of worrying about getting paid. Lastly, a good factoring company, with a strong global presence acts in an advisory capacity, due to their global expertise that spans several industries, factoring companies can advice companies on the best course of action
Sellers in India should seek out some basic criteria for qualifying factoring agencies. For one, the agency should have a global track record and expertise so they can navigate international markets seamlessly and work with your buyer without any hassles. Secondly, exporters can compare different factoring service providers by comparing the total funded transactions till date. Thirdly, choosing a recourse-based factoring service will undoubtedly be a lot cheaper when compared to a non-recourse service. However, the inherent risks of a recourse based factoring solution may outweigh the costs as the risks fall back upon the seller in case of a default
Over the course of more than half a decade, we've had the opportunity to perfect our offerring and affordable factoring solutions to domestic and international traders in India.
These are the typical costs of factoring with Drip Capital
Interest Rates: We charge anywhere between 0.8% Per Month to 1.4% per month to our clients, the actual interest rates vary wildly depending on the supplier's financials, the sellers track record of completing orders and the buyer's track record of successful purchases.
Processing Fees: Unlike other factoring firms, we take pride in charging some of the lowest processing fees in the industry, and on occassion, we may also waive them off
That's it, there are no other hidden costs in availing our trade factoring services.
We've compiled this article to compare general factoring costs in the market
$5 Billion+
Trade Financed
6,000
Buyers & Suppliers
100+
Countries
100,000
Cross-Border Transactions