State The Difference Between Bill Of Exchange And Factoring?

1.	State The Difference Between Bill Of Exchange And Factoring?
Answer» Bill discounting is always of recourse type while FACTORING can be either with or without recourse. In case of recourse the factor does not assume the credit risk and it is the company which assumes the credit risk. Factoring is an off balance sheet entry in the sense that both amount of receivables and bank credit are not shown in the balance sheet which is not the case with the bill discounting which is shown in the balance sheet. In bill discounting there is only provision of finance while in factoring factor provides in addition to finance facility other facilities like sales ledger maintenance, collection etc.. Discounted bills MAY be re-discounted SEVERAL times before they mature for payment which is not the case with factoring.

Answer»

Bill discounting is always of recourse type while FACTORING can be either with or without recourse. In case of recourse the factor does not assume the credit risk and it is the company which assumes the credit risk.
Factoring is an off balance sheet entry in the sense that both amount of receivables and bank credit are not shown in the balance sheet which is not the case with the bill discounting which is shown in the balance sheet.
In bill discounting there is only provision of finance while in factoring factor provides in addition to finance facility other facilities like sales ledger maintenance, collection etc..
Discounted bills MAY be re-discounted SEVERAL times before they mature for payment which is not the case with factoring.

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