Yaa Factoring: An Option To Lcs Inward Clothe Manufacture

Factoring Finance inwards Apparel Sector: Guarantee of Secure Cash Flow in addition to Business Growth

Tanvir Hossain
Reporter of Textile Tribune
Shahid Aziz Hall
People's Republic of Bangladesh University of Textiles
Email: tanviranikbutex@gmail.com

Factoring: 

It’s a brusque term, non-bank financing of accounts receivable. It’s a fiscal transaction inwards which a line of piece of work organisation sells its line of piece of work organisation human relationship receivable, example-invoices; to a tertiary political party usually known equally “FACTOR” at a discount in addition to the ingredient buys the correct to collect the coin from the customers on behalf of the seller.

There are 3 parties withdraw involved, the factor, the somebody who sells the receivable in addition to the debtor which has the liability to pay the seller. The sale of the receivable transfers the ownership of the receivable to the factor, delivering all the rights associated amongst the receivables.

The primary policy of a factoring fellowship is that the fellowship volition purchase the invoice in addition to advance the seller coin inside 24 hours. The advance ranges from 80-95% of the value of invoice depending on the industry, the customer’s credit histories in addition to other criteria. The ingredient collects coin from the customers in addition to pays the ease of the coin to the seller minus a fee to a greater extent than often than non ranging from 2-6% assuming the collection risk.

Flow Chart of Factoring

Seller provides service to the customers
↓
Seller sends the invoice to the ingredient
↓
The seller receives cash on advance on the invoice of the seller from the ingredient
↓
Factor collects total payment from the client
↓
Factor pays ease of the coin minus a fee to the seller

Factoring inwards wearing clothing sector: 

Factoring inwards wearing clothing sector tin ensure secure in addition to fast cash menstruation inwards stuff business. Business transaction inwards Apparel equally good equally stuff sector is done past times L/Cs which are becoming less pop equally days are passing due to the complex price in addition to procedures. Factoring inwards this regard tin eradicate the work of cash menstruation equally the line of piece of work organisation gets minute payment from the ingredient rather waiting for several months. And the fellowship tin expand line of piece of work organisation in addition to the cash menstruation is secure. Factoring has already been oft used inwards Apparel sector inwards INDIA,CHINA,VIETNAM,UK,USA in addition to other countries. Its hig fourth dimension to innovate Factoring inwards Bangladeshi Apparel sector for fast in addition to secure line of piece of work organisation transactions.

Advantages over banking company loan or L/Cs: 

Factoring is non similar a banking company provided loan in addition to it does non practice a liability on the remainder sheet. Sometimes it’s considered equally 1 of the virtually expensive cast of financing but, it’s non e'er true. Yes, considering the charge per unit of measurement of discount of factors against involvement charge per unit of measurement of banking company loan, factoring costs more. But when someone does non qualify for a loan it doesn’t thing what charge per unit of measurement is. Further banking company does non render service similar ingredient does.

L/Cs bring been using past times the manufacturing in addition to merchandising companies for quite simply about fourth dimension but, factoring is also non a novel concept. It’s been used since xvi century inwards dissimilar forms. It’s fourth dimension to innovate the concept of factoring inwards our province in addition to many factoring companies are opening branches inwards Bangladesh.

In illustration of L/C in that place is fourth dimension boundary in addition to the line of piece of work organisation has to opened upwardly novel L/C for dissimilar companies which is fourth dimension consuming in addition to costly. Importers bring to render sufficient safety in addition to required margin to confirm L/Cs from the banking company in addition to sometimes growing requirement for L/C margin goes beyond the fiscal might of the importer.

Different non L/C mechanisms of merchandise payment similar opened upwardly line of piece of work organisation human relationship merchandise payment in addition to documentary collection in addition to factoring are beingness used progressively.

Worldwide scenario of factoring: 

In 2013 the total amount of international factoring inwards nearly lxx countries stood euro 357.23 billion in addition to the amount of total factoring accounted for 2.23 trillion euro at the same time.

Factoring inwards Bangladesh: 

Though factoring is rattling pop inwards unusual countries, it’s even in addition to thus to survive introduced inwards Bangladesh. International sleeping room of commerce inwards association amongst Factors Chain International (FCI), Asian Development Bank (ADB) in addition to People's Republic of Bangladesh Institute of Bank Management (BIBM) had organized a seminar of late at Westin Dhaka to reintroduce factoring inwards Bangladesh.

Some non-banking fiscal institutions similar IDLC, Lanka Bangla, Prima Dollar in addition to other companies bring launched domestic factoring inwards Bangladesh.

Factoring is done in addition to thus that the line of piece of work organisation tin have cash to a greater extent than rapidly than waiting 30-60 days for a customer’s payment. International factoring is necessary for ameliorate in addition to polish merchandise finance in addition to it is fourth dimension to review cross-border factoring final result past times focusing on cost-benefit in addition to legal issues.

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