Factoring in India [pic]
1.1 Evolution of Factoring
05 1.2 The Kalyanasundaram Committee Recommendations on Factoring
The Concept of Factoring
1. Mechanics of Factoring
2. Types of Factoring
3. Export Factoring
4. Mechanics of Export Factoring
5. Types of Export Factoring
6. Scope of Export Factoring in India
7. Services Offered by Factors
Factoring Vis-à-Vis Other Means of Financing
28 1. Services Currently Available
2. Limitations of Current Arrangement
3. Bills of Exchange Vs Factoring
1. SSI Units and Factoring
2. Factoring as a Remedy
3. Factoring for SSI
4. Other Potential Segments
Relevance of Factoring Services in India
40 1. The Legal Framework
2. The Present Law
3. Suggested Legal Framework
1. The Summary
2. Opinion from Factoring Representatives
1.1 EVOLUTION OF FACTORING:
The term 'Factor' has its origin from the Latin word 'farce' meaning 'to make or do’, i.e. to get things done. The dictionary defines Factor as an agent, particularly a mercantile agent. Factoring has a long and fascinating history which traces back to several centuries. In early stages, Factors were itinerant merchants who were entrusted with merchandise belonging to others. They were the `middlemen' between countries which were still in early stages of development. It is interesting to note that Factoring in one form or other was involved in much of the world's commerce.
The growth of Factoring, in a fairly recognizable form, took place in the fifteenth and sixteenth century with the advent of the period of exploration and colonization by Great Britain, France and Spain. When the mother countries started shipping goods to the settlements under the control of foreign lands, the Factor arranged for the sale and distribution of these goods and became the local representatives of the manufacturers. Initially they maintained extensive storage facilities for the merchandise received by them from abroad and made arrangements for the cartage of such merchandise to customers throughout their respective territories. The Factors principal was to sell such merchandise on the best terms. The Factors didn't own the merchandise, but were responsible for its safe keeping, as well as for the proceeds they received upon its sale. In course of time, Factors prospered and grew in economic strength.
To the earlier services, rendered to their foreign principals, they added the practice of making advance payments to their principals against the security of the merchandise in their possession. The Factors also obtained information relating to local customers (which couldn't be transmitted in good time to the principals abroad) and assumed the risk of losses, in case they were unable to collect the amounts from the customers. Thus, the Factor substituted itself as a debtor of high credit standing for individual customers of uncertain creditworthiness, from whom the principal, otherwise, would have had to collect the amounts due, individually.
During the later years of the nineteenth century and the early years of the present century, the storage, selling and general merchandise functions...
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