Factoring

Factoring is the credit service provided to product dealers in which the rights to collect money from the dealer’s trade receivables will be assigned to the factoring credit provider. In turn, the factoring credit provider, as the assignee, will pay for the products, in whole or in part as agreed, to the dealer prior to the due date of receivables. The assignee will charge interest on advanced payment, operating fee and receivable management fee, which includes the collection of receivables when due and preparation of the report on receivables. Trade debtors will be notified of such right assignment and, accordingly, the payment will be made directly to the assignee when it becomes due.

As the product dealer (credit applicant) receives payment for product prior to the due date (cash advance credit) from the Subsidiary (factoring credit provider), the factoring credit service is therefore beneficial to the dealer as it enhances liquidity of the business, helps manage trade receivables and control the collection on behalf of the dealer. This will then help alleviate the receivable management burden of the dealers which in turn will free up more time for them for business planning.

Generally, the Subsidiary will determine total credit limit of the dealer to be used as revolving credit within such determined limit. Each time when cash advance credit is required by dealers, an invoice must be presented to the Subsidiary for credit approval consideration. Such factoring credit can be revolved but the total utilized amount must be within the credit limit.

The Subsidiary commenced its factoring credit operation since Year 1999. Majorities of its factoring credit customers are small and medium-size business operators in need of short-term working capital. In general, receivables used for factoring are trade receivables with maturity of not more than 180 days. Most of the Subsidiary’s factoring credits provided are with recourse. Service provision can be divided into 2 main areas as follows:

1. Domestic Factoring
2. International Factoring