What is Factoring?
As your business grows, so does your
need for working capital. Healthy
companies need cash…….
- To finance Expansion
- To fund stocks
- To meet overheads/ salaries
We at LankaBangla specialize in providing you with instant cash through the purchase of accounts receivable or debts outstanding which is a financing technique known as Factoring.
Factoring moves your cash flow forward creating immediate cash to improve your financial position and increase your purchasing power. Thereby, it provides you with the economic strength to expand production, increase sales and profits.
FACTORING IS A COMPREHENSIVE SALES LEDGER SERVICE FOR YOU INCORPORATING:
- Credit Advice
- Credit Control
- Generation of Statements & Reminders to Debtors
- Collection of Cash and Cheques
- Providing Cash in Advance of Collections and
- Providing Relevant Data to the Client on the Up-To-Date Status.
Factoring is gaining recognition as a source of short-term finance worldwide.
- Do you operate profitable business that is occasionally short of cash?
- Is your money tied up in 30, 45, 60, 90 days credit terms?
- Are you spending your valuable management time chasing behind receivables?
- Do you like your business to benefit from a “credit line” linked to your receivables (and no other collateral) which you could draw upon
Choose Our Factoring And Never Let Lack Of
Working Capital Slowdown Your Business Again.
How Factoring Benefits You?
Factoring is a service designed to improve your cash flow position by turning your sales into ready cash.
No Tension! Get Instant Cash, Grow The
As soon as you make a sale on credit, you (the client) get the instant cash on that credit sales directly from LankaBangla and you are relieved of that non- realization of receivables. Thus, your cash flow accelerates, purchasing power increases and eventually, your production & business moves up and credit rating improves.
Debt Collection……………Our Problem, Not Yours
As the factor, LankaBangla assumes the responsibility of debt collection (obtaining post- dated cheques) on all the invoices factored and you (the client) are relived of problems of debt collection.
Sales Ledgers……………No More Your Headache
Our operations are fully computerized and our staff is well experienced and professional. We keep you informed through monthly sales analysis and debtor payments report. Thus you are relieved entirely of the cares and responsibility of maintaining a sales ledger and credit control.
Besides, you get the benefit of credit information systems available to us and a wealth of experience in the vital business of collecting cash.
Types of Factoring
With Recourse To The Client:
Where the client takes over the bad debts.
Non- Recourse To The Client:
Where the factoring company underwrites the bad debt risks.
LankaBangla provides factoring with recourse to the client. We currently offer only domestic factoring facilities, where the client, its debtors and the factoring company are all in the same country and a single local currency is used in all transactions.
How Factoring Works?
- After selling the goods on credit, the clients( supplier/dealer) invite its customer/debtor with the notification that all money due on the invoice are assigned to and must be paid to LankaBangla by printing an assignment clause on the invoice.
- After entering into the “Factoring Agreement” with LankaBangla, the client sells the invoice to LankaBangla.
- LankaBangla makes prepayment (advances) to client up to a specific percentage of the invoice value in accordance with the approval.
- LankaBangla assumes the collection function (obtaining the post-dated cheque) and sends and statements and reminders to the customer (debtor).
- LankaBangla gets the payment and at periodic intervals, the details of unpaid invoices and other control reports are submitted by LankaBangla to the client.
- After collecting the debt from the debtor/customer, LankaBangla pays the client the remaining percentage of the invoice value, after deducting the service charge and the discount charge.
What does Factoring Cost?
Factoring Discount charged on the prepayment against receivables, and Service Charge to cover the cost of services such as collection, sales ledger management and periodic MIS report.
WHY LANKABANGLA FINANCE IS UNIQUE IN FACTORING?
- Swift and prompt service
- No hidden cost
- No minimum cost per debtor
- Pioneer and long experience in Reverse Factoring
- Fund transfer within shortest possible time through widest banking network having highest number of ATM booths in the country
- Multiproduct facility under the single roof
- Individual attention to each client
- Reverse Factoring is a financial instrument in which the invoices of suppliers duly accepted by the client (buyer) are factored.
- In case of Reverse Factoring the client is the buyer as against the client being seller in case of normal factoring.
- Here Factoring Agreement is between the buyer and the factor.
- In case of Reverse Factoring, funds are released to suppliers after the buyer (client) duly accepts the invoices.
- Under Reverse Factoring, the lender (the Factor) purchases accounts receivables only from high quality buyers.
REVERSE FACTORING PROCESS
DIFFERENCE WITH TRADITIONAL FACTORING
- Traditional Factoring is related to many buyers against a single supplier, i.e. funding is done against a number of debtors whereas funding is done against a single buyer in Reverse Factoring.
- In case of Traditional Factoring, the Factoring Company may not know whether the supplier really delivered said goods or services or whether the goods will be questioned in respect of quality and full payment. Due to all these, the Factoring Company provides a fractional part of receivables (such as 80% of invoice value). But in the case of Reverse Factoring, such possibilities are near to the least. As a result, the Factoring Company may get comfort to provide up to 100% of the invoice value (minus the interest & service fee).
- Factoring limit facility is given to the supplier in Traditional Factoring but in the case of Reverse Factoring, limit facility is given to the buyer.
- Traditional Factoring is not a suitable financing instrument in environments with weak contract enforcement institutions, incomplete credit information or frequent fraud; in such circumstances, Reverse Factoring could be a solution.
- Reverse Factoring is designed to focus on the big and structured corporate houses.
- It ensures the continued flow of working capital for which Financial Managers use their 60% working time.
- It helps purchase raw materials, semi-finished products, finished products (as the case may be) at a reduced price, because Reverse Factoring arranges a cash payment to the suppliers.
- It is less complexities as against traditional working capital supporting products such as OD, CC, etc.
WHAT IS DISTRIBUTOR FINANCE?
Distributor Finance provides a financial support to credit worthy distributors in order to purchase finished goods from manufacturers. Distributor Finance ensures continued liquidity in the supply and distribution chain. This financial tool creates a satisfied and loyal distribution network.
HOW DOES DISTRIBUTOR FINANCE WORK?
- Distributor places an order/ lifting order to the manufacturer.
- Distributor sends a copy of order / lifting order to LankaBangla and requests us to make payment in the name of the manufacturer.
- LankaBangla makes payment to the manufacturer.
- Manufacturer delivers goods to the distributor.
- After selling goods, the distributor repays LankaBnagla within the given credit period of 30/60/90 days.
BENEFITS OF DISTRIBUTOR FINANCE
- Easy access to working capital for the distributors
- Increased liquidity will help you expand your business
- Improved cash flow management
- Better management of trading relationship
- Sustainable growth in your sales
- Offers you a suitable time period to repay
- Allowing you to focus more on your core/main business
LankaBangla, a joint-venture financial institution established with multinational collaboration, started its journey in 1997. In 2003, LankaBangla entered into a new dimension with fresh equity investment from Sampath Bank Limited, a leading commercial bank of Sri Lanka and First Gulf Asia Holdings Limited, Kingdom of Saudi Arabia, a multi-faceted asset management and investment banking company. In 2004, ONE Bank Ltd. was introduced as a share holder of LankaBangla. The technical support provided by Sampath Bank has been working as a catalyst for LankaBangla to emerge as the most innovative financial solution provider to the industrial development of the country.
- LankaBangla is a leading full-fledged financial institution established under Financial Institutions Act-1993 licensed by Bangladesh Bank.
- The Factoring Department, with the assistance of other departments, provides comprehensive support to a client’s requirements.
- Our system is fully computerized, using up-to-date software as the backbone of the operation.
- More importantly, we have a highly motivated, experienced and qualified staff committed to giving its customers the best possible service.
- No more waiting. Avail of the finest service in short term financing in Bangladesh.
HOW TO APPLY?
- You can collect the factoring application form from any office of LankaBangla free of cost or download form from our website www.lankabangla.com and apply along with the relevant papers.