Introduction
Domestic factoring means an agreement whereby the seller assigns existing or future accounts receivable to Bank of China for the purpose of trade finance and functions like receivables ledgering, collection of accounts receivable and protection against bad debts.
Bank of China's local branch in the region where the seller/buyer is located will assume the responsibility of the Seller's/Buyer's Factor respectively.
Features
1. Easy risk coverage. Bank of China has branches all over the country and can appraise the credit risk of various buyers. When a buyer fails to pay in full without dispute, Bank of China can assume the buyer's credit risk and make payment under guarantee; business operations of domestic factoring are very simple, and the seller can obtain finance and other factoring services simply by providing invoices and other necessary documents.
2. Financing facilities and improved financial report. Bank of China provides payment in advance, improving the seller's cashflow. At the same time, Bank of China can buy out accounts receivable, and help the seller turn the "receivable" into "income" to improve the seller's financial statements.
3. Reduction of fees and costs. Reduction of the customer's interest costs. The term of factoring finance is more flexible compared to working capital loans. It reduces the seller's interest expense and the management cost. Factors are in charge of business information survey, accounts management and receivables collection, setting the seller free from a lot of tedious work, and reducing management costs effectively.
4. Expansion of market and increase of profits. With factoring services, the seller no longer worries about the buyer's credit risk, and dare to use sales on credit to attract more buyers, thus exploring new markets. Business turnover will then grow and profits will increase.
Interest Rate
In principle, the same level of related RMB loan interest rate applies.
Target Customers
1. In principle, it is applicable to receivables arising from domestic goods or services trade adopting the open account (O/A), with the payment term not exceeding 180 days.
2. Domestic factoring is applicable to the situations that the seller may worry about the credit risk of the buyer, have difficulty in the working capital turnover, have low accounts receivable turnover, or want to control risks and expand market;
3. It is applicable to buyers and sellers who hope to alleviate the burden of account receivable management and collection.
Application Qualifications
1. Customers who have the corporate business license legally approved, registered and annually checked and other valid certifications sufficient to prove the legitimacy and scope of its operation;
2.Customers who have a loan card;
3.Customers who have the account opening permit and have opened a settlement account with Bank of China;
4. Customers who have acredit line in Bank of China.
Process
1. The seller submits the Domestic Factoring Application to Bank of China, and whereby the Seller's Factor contacts the Buyer's Factor to evaluate the buyer's credit;
2. The Buyer's Factor evaluates the buyer's credit limit, and the Seller's Factor signs the Domestic Factoring Agreement with the seller;
3. Upon delivery of goods and document issuance, the seller assigns accounts receivable to his factor, and further the Seller's Factor assigns them to the Buyer's Factor;
4. The Buyer's Factor delivers the Notifice of Assignment/Confirmation of Accounts Receivable to the buyer for confirmation of deal authenticity and the due date of payment;
5. If the buyer makes payment to the Buyer's Factor on the due date of invoice, the Buyer's Factor will transfer the funds to the Seller's Factor; If the Buyer's Factor receives neither a dispute notification nor the buyer's payment within 60 days after the maturity date, it will make payment under guarantee to the Seller's Factor;
6. The Seller's Factor deducts the financing principal and interest (if any), commission fees, and pays the balance to the seller.
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