Global recession & Its impact on factoring services in India - A study

Factoring is a financial transaction where a business sells its accounts receivable for immediate cash to a third party referred to as the ‘factor’ at a discount in exchange for immediate money with which to finance continued business activities. With the impact of Industrial Revolution, the focus of factoring changed. Before the 1930s the most popular industries for factoring were the garment and textile industries which depend on raw materials. In order to make sure that companies could continue to buy raw materials to produce clothing and textiles, factoring was used. The importance of factoring became significant since then. This paper focuses on understanding the concept, need and importance for factoring services in terms of global and domestic scenario. It also concentrates on the reasons for slow growth of factoring in India and the trends in terms of volume of factoring services worldwide. The analysis is done based on the secondary data. The observations made out of the study is that Taiwan, Hong Kong, Korea, Singapore, Thailand and Malaysia are smaller geographically but are with high volume of factoring turnover as compared to India which is at the 8^th position. At the end it is to be concluded that factoring is now gaining its importance in India slowly with the increase in customer's access to benefits of factoring. To encourage the factoring services government regulation/policies need to be modified further so that more and more private players can come forward to provide factoring services. Customer awareness about benefits of factoring is to be increased further to fight back the global leaders in factoring business.