Comparison between Bill Discounting and Factoring.

Bill Discounting Factoring

1. Individual Transaction
2. Each bill has to be individually accepted by the only.
drawee which takes time.
3. Stamp duty is charged on certain usance bills
together with bank charges. It proves very
expensive.
4. More paperwork is involved.
5. Grace period for payment is usually 3 days.
6. Original documents like MTR, RR, and Bill of
Lading are to be submitted.
7. Charges are normally up front.
1. Whole turnover basis. This also gives the
client the liberty to draw desired finance
2. A one time notification is taken from the
customer at the commencement of the
facility.
3. No stamp duty is charged on the invoices.
No charges other than the usual finance and
service charge.
4. No such paperwork is involved.
5. Grace periods are far more generous.
6. Only copies of such documents are
necessary.

7. No upfront charges. Finance charges are

levied on only the amount of money
withdrawn.
Comparison between Cash Credit and Factoring.
Cash Credit Factoring
1. Margin retained on receivables are usually 40- 1. Margin usually retained is 10 %.
50 %. 2. Prepayments against invoices are made as
2. The drawing power on the basis of stock and when they are factored. It is like cash
statements is computed once a month. If sales.
invoices are raised between submissions of
stock statements, no money can be drawn
against them. 3. No statements are to be given. On the
3. The client has to submit various statements contrary Factors furnish various reports to both
like QIS, I, II & III stock statements etc. to the the client and the customer.
bank. 4. One of the functions of the factor is debt
collection
4. No collection services performed for the 5. The Factor allows grace up to 30 days.
clients.
5. Once a book debt exceeds its usance period, 6. No such bifurcation. The factoring account
it is removed from the eligible list operates like a CC account
6. Higher limits are bifurcated into CC and DL 7. Finance charge linked to our cost of funds,
components. which is competitive to that of banks.
7. Interest linked to PLR.