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Tuesday 11 October 2011

BBI-FSM-Distinguish between Factoring and Bill discounting.

Factoring and Bill discounting:
are:
(1) While factoring is management of book-debts, bill discounting is a sort of borrowing from
commercial banks.
(2) In factoring no grace period is given, whereas in bill discounting grace period is 3 days.
(3) For factoring there is no Specific Act, whereas in case of bill discounting Negotiable
Instruments Act applies.
(4) Factoring is a portfolio of complementary financial services whereas bill discounting is
usually on case to case basis.
(5) In factoring the basis of financing is turnover. Whereas in bill discounting it is the
security provision as well as the requirement of finance which determine the amount of
financing.
(6) In factoring the risk of bad debts is passed on to the factor, whereas in bill discounting it
is still retained by the business.
The main differences between Factoring and Bill discounting

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