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Working Capital Financing^371

not able to mobilise the required funds from the normal short-term sources.

While the book debt purchasing is fundamental to the functioning of factoring, the
factor can provide three other basic services to the companies:

ï Sales ledger administration and credit management

ï Credit collection and protection against default and bad debt losses

ï Financial accommodation against the assigned book debts

In developed countries like the US the factors provide various other services in addition
to the basic services mentioned above. They include:

i. Providing information on the prospective buyers

ii. Credit risk management

iii. Financial counselling

There are seven different types of factoring services available abroad. The brief
comparison of them is tabulated below:

Types of Factoring Types of Services

Availability of

Finance

Protection against

bad debts

Notification to

debtors

Sales ledger

administration

Collection

1. Full non-recourse
   factoring

Y Y Y Y Y

2. Recourse
   factoring

Y N Y Y Y

3. Bulk factoring Y N Y N N


4. Maturity factoring N Y Y Y Y


5. Agency factoring Y S Y S N


6. Invoice
   discounting

Y N N N N

7. Undisclosed
   factoring

Y S N N N

Y = Provided, N = Not Provided, S = Sometimes Provided

Factoring is different from bill discounting in the aspect that bill discounting is just
providing a credit on the bills without any onus on the company providing the credit to
collect or manage the receipts. Bill discounting is termed as Invoice discounting in the
above table and you can yourself see that apart from providing finance it offers no
other service which full non-recourse factoring provides.

Still the biggest benefit of going for factoring to a specialist organisation is that the