Page 33 - DMGT409Basic Financial Management

Basic Financial Management

Notes

Caselet HSBC extends Factoring Service to SMEs

SBC today announced the launch of factoring services to SMEs, whose rise in
the wake of strong export growth has expanded opportunities in the fi nancial
Hbusiness stream. The service would be available at Mumbai, New Delhi, Kolkata,
Pune, Bangalore and Chennai. HSBC, which had been providing the factoring services to
large corporates since 2005, decided to focus on SMEs due to their large contribution to
the economy as factoring would help small businesses achieve faster growth by effi ciently
managing their working capital. Announcing the launch of the service on Tuesday, Mr
Bhriguraj Singh, Senior Vice-President and Head Factoring (India), said that HSBC with a
large SME customer base would not be looking at any particular sector of the business for
its factoring service.

Key Determinant
He added that the key determinant would be the quality of the product or services that
could fit within the manageable risk.

Stating that the ITES sector would be a business prospect, Mr Singh said that the bank
would not be averse to IT product companies and would be factoring their transactions
based on the parameters measurable risks.
Useful to Export Trade
Factoring is useful not only in export but also in export trade. It gains importance in today’s
international trade since international buyers are increasingly unwilling to enter into letter
of credit-based transactions due to the additional monetary and administrative costs
involved.

The bank has already deployed 200 people to promote the product among SMEs and would
add more manpower as the business expanded, he said.
Source: thehindubusinessline.com

Task Visit the branches of any two banks in your locality and fi nd out from them about

the various ways in which they provide finance to business enterprises. Find out about the
types of securities the banks accepts for such fi nance.

2.4 Summary

Every business requires money to start and run the business. ‘Business finance’ refers to the
money required for business purpose and the ways by which it is raised.
Every business needs funds to purchase fixed assets, must day-to-day expenses, to fund

business growth, bridge the time gap between production and sales, to meet contingencies
and to avail of business opportunities.
The importance of finance has considerably increased in modern times due to need for

large-scale operation, use of modern technology and promotion of sales.

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