Textile Industry- Expansion through Factoring

Sriya enterprise is a Trade Finance, FEMA, Banking Regulation along with Export Factoring Advisory firm. We provide a complete bouquet of services in all the above-mentioned areas.

Sharing one more success story under the aegis of Sriya Enterprise – Trade Finance Consultancy. We have been successful in arranging a scalable, USD 3.0 million receivables finance facility(export Factoring) for a Textile manufacturer. The facility arranged is akin to half of what they presently have in form of bank finance.

The company was in the expansion mode and had substantial production capacity implemented. However, the corpus of collateral did not complement the working capital gap of the client. In view of the expansion, the requirement for Raw materials procured domestically and internationally has also increased. After post lot of deliberation and understanding of the company structure, a couple of changes were suggested in the utilization pattern of the WC facility available, which would substantially reduce the cost of funds

Additionally, we got them connected with the appropriate financial institution as they were spoilt for choice looking at the multiple options available in the market. The facility enabled them to diversify their borrowing sources, as opposed to traditional loan programs. Additionally, it enabled them to utilize their existing WC for domestic procurement.

This benefited the company by getting greater credit protection and extended credit period flexibility to attract new customers and enhance its ability to secure larger orders from existing customers. In addition, an increase in cash flow resulted in realigning the use of bank finance.

1. Factoring market globally – $3 trillion and likely to be around $6-9 trillion in next 4-7 years
2. Factoring in India – $6 billion or 0.2 percent of the country’s gross domestic product (GDP)
3. Factoring credit has only a 2.6 percent share in the overall formal credit

Export Factoring also protects the exporter against buyer default risk, thus enabling MSMEs to grow and expand their territory without worrying about the security of their payments.

Main Features :

1. Healthy Balance sheet: Because invoice factoring doesn’t involve lending. It is not considered to be debt, so it doesn’t impact your debt to income ratio
2. Flexible limits: The limit is determined by computing the number of receivables and eligibility of your customers. Limits are enhanced based on growth.
3. No Collateral
4. However it is imperative to understand that Factoring provides receivable finance, it’s not a replacement to the traditional bank finance but a complementary facility