securitisation and factoring

[Anusha H]

Dear All,

 

Can anyone please explain me the concept of securitisation and factoring with example.
--
Regards
Anusha H
Management Trainee.

[chakri hegde]

Securitization is the process by which financial assets such as loan receivables, mortgage backed receivables, credit card balances, hire-purchase debtors, lease receivables, trade debtors, etc., and are transformed into securities.

These kind of  assets such as loan assets, mortgages, credit card balances, hire-purchase debtors, trade debtors, etc., or defined rights therein, are transferred, fully or partly, by the owner (the Originator) to a Special Purpose Entity (SPE) in return for an immediate cash payment and/or other consideration.

A Factor is a financial institution which offers services relating to management and financing of debts arising from credit sales. The service provided by the factors is known as Factoring. It is a financial option for the management of receivables. To say in simple words, it is the conversion of credit sales into cash. In factoring, a financial institution (called factor) buys the accounts receivable of a company (Client) and pays upto 80 -85% of the amount immediately on agreement. Factoring company pays the remaining amount (Balance -finance cost-operating cost) to the client when the customer (Credit Party to whom the goods are sold by the client) pays the debt.

In Indian many companies are proving this kind of factoring service. To name some, Canbank Factors Limited, SBI Factors and Commercial Services Pvt. Ltd, Standard Chartered Bank etc.

---------------------
With Best Wishes
Chakri G Hegde
Nissin Foods India Ltd.
Bangalore

[Anand Wadadekar]

TO Add,

Factoring is very beneficial in international trade for settlement of
the business.

Over and unwarranted Securitization of assets has resulted in the
financil crises in western part of the world.

Regards,
- Anand Wadadekar
Economist

On Sep 17, 5:26 pm, chakri hegde <chakri.he...@gmail.com> wrote:
> *Securitization* is the process by which financial assets such as loan

> receivables, mortgage backed receivables, credit card balances,
> hire-purchase debtors, lease receivables, trade debtors, etc., and are
> transformed into securities.
>
> These kind of  assets such as loan assets, mortgages, credit card balances,
> hire-purchase debtors, trade debtors, etc., or defined rights therein, are

> transferred, fully or partly, by the owner (the Originator) to a *Special
> Purpose Entity (SPE)* in return for an immediate cash payment and/or other
> consideration.
>
> *
> *
>
> *A Factor* is a financial institution which offers services relating to

> management and financing of debts arising from credit sales. The service

> provided by the factors is known as *Factoring. *It is a financial option

> for the management of receivables. To say in simple words, it is the
> conversion of credit sales into cash. In factoring, a financial institution
> (called factor) buys the accounts receivable of a company (Client) and pays
> upto 80 -85% of the amount immediately on agreement. Factoring company pays
> the remaining amount (Balance -finance cost-operating cost) to the client
> when the customer (Credit Party to whom the goods are sold by the client)
> pays the debt.
>
> In Indian many companies are proving this kind of factoring service. To name

> some, *Canbank Factors Limited**, **SBI Factors and Commercial Services Pvt.
> Ltd**, **Standard Chartered Bank** etc*.

>
> On Thu, Sep 17, 2009 at 3:03 PM, Anusha H <anu.anusha1...@gmail.com> wrote:
>
> >  Dear All,
>
> > Can anyone please explain me the concept of securitisation and factoring
> > with example.
> > --
> > Regards
> > Anusha H
> > Management Trainee.
>

> *---------------------

> With Best Wishes
> Chakri G Hegde
> Nissin Foods India Ltd.

> Bangalore*

[Anusha H]

Thanks a lot for the information.