Question : Case based question, Answer the following 3 parts Praveen Steel Trading Company Ltd. has a substantial amount of funds locked up in Sundry Debtors. It currently has a Bill Discounting Facility from Axis Bank which is also fully used up. Despite requests to Axis Bank to provide an adhoc Bill Discounting Facility, (to help the company release the amount locked up in Debtors), the company has not been granted any additional facility, with the result that the company's operations are now getting affected as working capital is stuck up in Debtors. It has now approached SBI Factors Ltd. (subsidiary of SBI) to help in the release of funds stuck up in Debtors through Factoring of the bills stuck up in Debtors. After due deliberation and discussion with the representatives of SBI Faptors and the company, it was decided to keep this decision of Factoring in abeyance, as the company was mulling other options. Since the terms for the Factoring were very stringent, the company now decided to approach HDFC Bank for Forfaiting the bills. Even Forfaiting was not acceptable to the company and hence they decided to mull other options, other than Factoring and Forfaiting.

 a. What is Bill Discounting? How is it different from Factoring? (Illustrate your answer) 

b. How is Forfaiting different from Factoring? (Illustrate your answer) 

c. After not being satisfied with the above two methods of Bill Discounting, the company is now looking for other options. What in your opinion can be the other OPTION/S to help release the funds locked up in Sundry Debtors? Explain with an illustration.

Answer rating: 100% (QA)

a Bill Discounting is a financing arrangement where a company sells its trade bills or invoices to a financial institution at a discounted price before their due date The financial institution such as ... View the full answer