# Receivables Factoring Solutions for Suppliers in India ### Find out what Receivable Factoring is, How Much Does it Cost & Solutions by Drip Capital #### What is Receivables Factoring? Account receivables factoring, or simply receivables factoring is a type of financial service that allows businesses to turn their outstanding accounts receivables into immediate cash as working capital solution. This capital can be used for business operations, to work on the next order or even for capital expenditure. A receivable, or a trade receivable is an outstanding payment that a seller or supplier is yet to receive from the buyer. A commercial trade invoice mentions the due date of payment against any particular receivable, which means the receivables are an asset. This means the seller is in possession of an asset that can either be sold or be pledged as a collateral for securing additional financing, just like any other asset (a house or a vehicle). In case of factoring, it is an outright sale of the trade receivable and is hence also referred to as receivables purchase - implying the purchase of a receivable by the factoring company. #### Why do Companies Use Receivables Factoring Services? Here are a few reasons why one should choose accounts receivable factoring as opposed to other traditional trade financing techniques. For one, it is much faster - since it is technically the sale of an asset, factoring companies can do away with lengthy compliance and documentation that is generally associated with a loan. Secondly, it is a facility that is offered over and above the banking limits in India. For growing trading houses and exporters in India, this feature is quite beneficial as it allows them to access much needed capital to fuel business growth. Lastly, if the buyer or the importer defaults on this accounts payable, the factoring company assumes full responsibility and the supplier can focus on growing the business. These benefits make A/R factoring quite lucrative for domestic businesses and exporters alike. #### An Example of Accounts Receivable Factoring Say Hindustan Construction Hardwares Private Limited sells agrees to sell Hardware worth ₹1,000,000 to Interglobal Hardware Retailers in Belgium. A commercial invoice is drawn that mentions the ₹200,000 will be paid upfront and the rest will be paid 30 days after shipment. Based on this agreement, Hindustan Construction Hardware finishes the production of the goods and ships them out. As per the invoice, Hindustan Construction Hardwares is now in possession of an asset valued at ₹800,000 - the trade receivable - that can be sold to an accounts receivable factoring company in return for a small fee. ### How Does Receivables Factoring Work? 1. Submit invoice digitally on Drip's Portal 2. Get 80% invoice value in advance 3. Buyers pays 100% to Drip capital 4. We pay you remaining 20% less our charges ### Why Choose Drip Capital? We are a fintech company focused on solving the working capital problem for emerging market SME exporters by leveraging data and technology. We are re-building core parts of international trade finance infrastructure to level the playing field for small businesses. ## Why Choose Drip Capital's Receivable Factoring Service? Drip Capital makes receivable factoring possible by financing up to 80% of the invoice value on the day of your export shipment (After submission of the shipping BL), while the remaining 20% minus the factoring charges is paid once the buyer makes full payment to Drip Capital. We are a fintech company focused on solving the working capital problem for emerging market SME exporters by leveraging data and technology. ### Quick Facts About Drip Capital - $8 Billion+ Trade Financed - 11000+ Buyers & Suppliers - 100+ Countries - 100,000 Cross-Border Transactions ## Growth Stories ##### Pari Agro Exports Exporter of Basmati Rice from Punjab 4x increase in Turnover USD millions Drip’s factoring service has ensured that our liquidity doesn’t remain tied up in invoices for a long time. Since the start of our collaboration, we have been able to cater to more buyers and our export turnover has increased 4x between FY17-18 and FY18-19. ##### Tatva Enterprise LLP Exporter of Plastic products from Maharashtra 7x Increase in Turnover USD millions We started factoring our export invoices with Drip in FY17-18 and by 18-19 we were getting almost 25% of our invoices financed by them. With the boost in working capital and increased competitiveness in foreign markets because of better terms of sale, our turnover has shown a substantial increase. ##### Al Sami Agro Products Exporter of frozen foods from Andhra Pradesh 3x increase in Turnover USD millions As an exporter you may have a great offering, but without easy access to short-term finance, you face challenges in scaling and have to let go of many opportunities. Drip Capital’s easy and efficient export finance solution has helped us ensure there is continuous cash flow in our business. Now we can convert possibilities which we otherwise would have passed on. The result has been a 220% jump in sales in FY19. ##### Satya Impex Exporter of Red chillies from Andhra Pradesh 50% wallet share USD millions When we started our business in 2017, traditional lending institutes could not keep up with the increasing orders from our buyers. With Drip capital fulfilling our working capital requirement, in FY 19 our business reported massive growth as compared to the previous year, over 50% of those export invoices were financed by Drip. ## Frequently Asked Questions 1. **What is Receivables Factoring?** Account receivables factoring, or simply receivables factoring, is a type of financing that allows businesses to turn their outstanding invoices into working capital that they can use for their business operations. Drip Capital makes this possible by financing upto 80% of the invoice value on the day of your export shipment, while the remaining 20% minus the factoring charges is paid once the buyer makes full payment to Drip Capital. This ensures a steady flow of working capital, essential at every stage of the business, from procurement of raw materials to production and shipment of the finished products to an importer overseas.