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Selling your receivables? We provide factor financing for our customers. This is a process of Xinda agreeing to pay you the value of the invoice less a discount for commission and fees. We will advance most of the invoiced amount to you immediately and the balance upon receipt of funds from the invoiced party.
In this event, it allows you to obtain immediate capital based on the future income attributed to a particular amount due on an account receivable or business invoice.
Assume a factor (bank) has agreed to purchase an invoice of $1 million from ABC Pte Ltd, representing outstanding receivables from XYZ Corporation. The factor may discount the invoice by say 4%, and will advance $720,000 to ABC Pte Ltd. The balance of $240,000 will be forwarded by the factor to ABC Pte Ltd upon receipt of the $1 million from XYZ Corporation. The factor’s fees and commissions from this factoring deal amount to $40,000.
Factoring is not considered a loan, as neither party issues or acquires a debt as part of the transaction. The funds provided to you in exchange for the accounts receivables is also not subjected to any restrictions regarding use
Note that the factor is more concerned with the creditworthiness of the invoiced party – XYZ Corporation in the example above – rather than the company from which it has purchased the receivables, ABC Pte Ltd in this case. Although factoring is a relatively expensive form of financing, factors provide a valuable service to companies that operate in industries where it takes a long time to convert receivables to cash, and to companies that are growing rapidly and need cash to take advantage of new business opportunities.