How to Start a Factoring Business in India?
Factoring is a financial service that provides businesses with immediate cash by selling their accounts receivables to a third party (factor). This helps companies maintain liquidity and manage cash flow efficiently. In India, factoring is governed by strict regulations, and starting a factoring business requires adherence to legal frameworks and financial standards. This guide outlines the key steps to establish a factoring business in India. 1. Understanding the Factoring Business Factoring involves purchasing unpaid invoices from businesses at a discount and collecting payments from their customers. It provides businesses with working capital while reducing the burden of chasing receivables. Types of Factoring Recourse Factoring – The seller remains liable for unpaid invoices. Non-Recourse Factoring – The factor assumes the credit risk. Domestic Factoring – Invoices of businesses within India. Export Factoring – Involves international trade transactions. 2. Regulatory Fram...