GTF offers factoring in construction sector

Global Trade Finance (GTF), the only provider of international and domestic factoring and forfaiting services under one roof, has launched reverse factoring to facilitate contractors in the infrastructure sector to avail of finance to fulfil contracts.

"We have begun with the contractors of NHAI (National Highways Authority of India). The financing is done based on the strength of NHAI. The product has some attributes of working capital financing," said Arvind Sonmale, managing director and CEO of GTF.

Factoring involves selling of receivables at a discount to a factor. The factor then assumes the credit risk of debtors and receives cash as debtors settle their accounts.

Under reverse factoring, NHAI contractors are paid 100 per cent of the amount against bills for bitumen and oil purchased, for a tenure of up to 120 days. GTF assesses and considers only regular contractors having had a relationship of minimum six months. GTF gets the money back when NHAI clears its contractors bills.

As part of its efforts to provide customised solutions for receivables management, global trade financing and risk mitigation, GTF has also launched import factoring.

"Import factoring works out cheaper compared with a letter of credit and this also provides the facility of an open account system," Sonmale said.

In import factoring, GTF assumes the responsibility for collection of receivables from the Indian importer on behalf of the factor based in the country of the exporter.

GTF processes 500 to 600 invoives per day. All the invoices received are processed the same day and the beneficiaries' accounts get credit the next morning.

"This is much faster than the cheque payment system as even clients based in far off Assam get payments within 24 hours of submitting invoices. Intra-circle cheque clearing takes up to three days and inter-circle clearing could take up to two weeks," Sonmale said.