Exporters frequently face challenges such as delayed payments and currency volatility, which can hamper their working capital. Factoring provides exporters with a means to convert export receivables into instant liquidity, enabling them to maintain smooth operations and capitalise on new opportunities.
In export factoring, receivables are sold without recourse, meaning the factor assumes the risk of non-payment. This protects exporters from bad debts and improves financial predictability.
India’s merchandise exports are projected to surpass $600 billion in 2025, and factoring is becoming a key enabler for exporters to sustain this growth. The Reserve Bank of India (RBI) actively promotes factoring as a tool for export finance, encouraging exporters to adopt this flexible financing option.
Benefits for exporters include:
- Preservation of equity since factoring is not a debt instrument
- Improvement in current ratio by unlocking funds tied in receivables
- Reduction in short-term debt and associated interest costs
- Enhanced ability to negotiate better supplier terms due to faster payments
- Off-balance sheet financing that strengthens financial statements
Factoring thus acts as a catalyst for exporters to enhance competitiveness and financial resilience in the global market.
