Domestic Factoring is a process of factoring of accounts receivables generated out of sales within India. The Seller assigns to the Factor the accounts receivables arising out of sales to buyers within the country on open account terms and receives payment thereagainst to the extent of 80-90% from the Factor, depending upon the credit terms.
Characteristics of Domestic Factoring Receivables:
- The seller’s performance obligation should be completed before availing funding.
- There should be a continuous sales flow on an ongoing basis with the same buyer or set of buyer(s).
- Suited for credit terms of 30-180 days.
- Transactions between two parties should be on ‘open account’ terms
- Credit sales to a buyer to be assigned to SBIGFL on a continuous basis, once the factoring arrangement is in place.