The Factoring Regulation Act 2011 (India): A snapshot overview

Shilpa Mankar Ahluwalia , Partner at Amarchand & Mangaldas & Suresh A. Shroff& Co.

Factoring is a form of business financing under which a business entity sells its receivables to a third party (factor) at a discount and receives immediate payment to finance its business. It is a useful financial tool for micro and small enterprises and helps such entities manage resource constraints, delayed payments and assist with receivables management. However, in the absence of a consolidated legal framework regulating factoring in India, it has so far played a limited role in business financing.