Frequently Asked Questions.

What is Factoring?

Factoring is a receivables management and financing service designed to improve the seller’s cash flow and to cover risk. This is best suited for financing trade and unlike other financing services, it normally requires no collateral.

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Why should I use Factoring?

Bibby turns the seller’s invoices into cash, which means that the seller can have instant access to its earnings. Sellers don’t have to wait for the usual long period to get paid by their buyers. The seller will therefore have a healthier cash flow, which will accelerate the growth.

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What is recourse and non-recourse factoring?

In recourse factoring, in the event of buyer failing to pay on maturity, the seller has to pay back the advance obtained from the factor. In non-recourse factoring the factor provides finance with a credit guarantee for buyers and will bear the bad debt risk in case if financial inability of the buyer to pay. In India, Bibby Financial Services presently does not offer Non-Recourse factoring.

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What are the types of factoring arrangement?

There are basically two types of Factoring arrangements:

 i) Domestic Factoring- If you are selling in India.

ii) Export Factoring- If you are exporting from India.

At present BFSI provides Domestic factoring facilities and shall offer export factoring in due course.

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How much advance can I get?

Advances are made as a percentage of invoice value, based on criteria such as quality of receivables, number and quality of the buyers and your requirements. Typically upto 80% of invoice value is advanced.

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Would Factoring cause any unpleasantness between the seller and its buyers?

Bibby understands and appreciates the seller's concern over this matter. However, in practice and in the context of modern day business, the buyers are unlikely to react adversely to the use of factoring. Recognizing the importance of the customer to the seller, and to help foster a closer client - customer relationship, every courtesy and consideration will be given by Bibby to seller's customers. Indeed, factoring helps the seller to avoid the embarrassment of having to directly seek payment from the buyers.

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Would using factoring give buyers the idea that the seller is in financial difficulties?

On the contrary, International customers now accept factoring as a normal, progressive business service. For growth-oriented companies, factoring finance is the preferred choice. In fact, factoring is today perceived as a sign of company's rapid growth. It is an indication of a growing organisation with keen focus on its core activities like production and marketing and outsourcing non core activities like collection and sales ledger management to experienced professionals. Factoring is definitely a significant global trend. During 2007, the total volume of business handled by factoring companies around the world was over Euro 1300 billion. Factoring is rapidly becoming the obvious business tool for growing companies and an accepted way of conducting business.

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How will the seller be kept informed of payments made by its buyer?

Bibby will send the seller a monthly statement of accounts. This statement will show the credits for debts purchased, a debit for credit notes issued and the amount of cash drawn, among other details.

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Do I have to provide any other security besides invoices in factoring?

Generally, you need not provide any additional security. However it depends on every individual case and different parameters.

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When do I get paid under factoring?

A prepayment advance is given to you on the submission of the relevant documents and invoices and the balance amount is paid on actual receipt of the payment from the buyer.

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Can I get advances on my invoices through factoring and get funds from other traditional sources at the same time?

Yes, you can avail advances from your traditional sources of funding along with factoring services. However, we will only make the advances on the debtors against which you have not availed funding from any other financial institution. Please note that any given invoice cannot be double financed

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Which types of industries are suitable for factoring?

A large number of industries are now covered under factoring, including automobiles, pharmaceuticals, textile, garment and engineering. In addition to the manufacturing sector, the services sector industries such as travelling, telecommunications, software services and so on are also suitable for factoring. If you sell on credit to your buyers, you should talk to us.

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Factoring sounds attractive, but what costs are involved?

There are 3 elements of Factoring cost:

• Service fee

• Discount charge

• One time setup fee

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How is the Discount charge applied?

Bibby charges the seller only for the amount used that is, if the seller obtains advance payments against the factored invoices before they are paid. The discount charge is calculated on a day to day basis for the actual period between such advances and the day of collection of the invoices factored.

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How is factoring advance repaid?

Automatically, when each invoice is eventually settled, buyers make payment to Bibby. In turn Bibby will pay the seller the balance after adjusting the advance, if any and outstanding charges.

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Factoring seems a rather expensive way of getting capital. Doesn’t it?

No, the correct way to evaluate factoring is in terms of the seller’s company’s growth and the opportunity a seller loses by foregoing business on account of unavailability of funds. By enabling the seller to gain access to additional working capital without restricting other forms of borrowing, factoring provides a unique credit service. And remember, when the seller counts the additional savings he will enjoy in terms of staff salaries, office overheads and all the incidentals that go into keeping his sales ledger and chasing for payments on his investments, the seller will see just how valuable factoring really is.

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What supporting information do I need to provide?

We will send you an Underwriting Checklist that will advise you of any additional information that we require further to what is set out in the Application form.

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Is Bibby Financial Services connected to the historic Bibby Line Group?

Yes, we are owned by the Bibby Line Group. 2007 was a momentous year for our business and our parent company, Bibby Line Group, which celebrated the bicentenary of its founding. To find out more about the Bibby Line Group and its two centuries of history, visit www.bibbylinegroup.co.uk To visit our parent company website visit www.bibbyfinancialservices.com

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