Expert Speak: Mr. Amit Dang

HSBC India's Factoring & Open Account Finance Solutions for SMEs

The small and medium enterprises (SMEs) in India typically face a key issue of raising finance, both for long term and working capital requirements. The otherkey issue is lack of infrastructure facilities.                                                             

The HSBC Group globally offers a suite of financial solutions to SMEs, including vanilla financing and factoring. The Hongkong and Shanghai Banking Corporation Limited, India (HSBC India) leverages these global capabilities and applies its learnings to offer a broad suite of transaction banking solutions, working capital financing and factoring. This, to my mind, goes a long way in overcoming the key issue of lack of adequate financing available to SMEs to grow the business. 

The HSBC Group has global presence across 87 countries and enables customers to do business at an international level. HSBC India, under its factoring platform offers a range of receivable finance solutions, including the traditional factoring product to SMEs, the key benefits of the product are:

• Facility based on strength of buyers and their payment track record with you
• Allows you to give better terms to your customers (cash discounts from customers).
• Mobilize cash tied up in receivables – cash flow generation
• Credit protection for export factoring transactions.
• Alleviates your internal administration work & reduced cost of collections
• Allows you to focus on business and outsource collections and ledger management job to Bank.

Now, a new system-based Reverse Factoring proposition, known as Supplier Invoice Finance Scheme (SIFS), designed to offer funding facilities to suppliers of large local/global buyers, has also been added to the factoring proposition. All the transactions will be processed online, facilitating reduction of paperwork and the corresponding processing cost. 
 

The key benefits to SME customers of large buyers having tie-ups with HSBC are: -

• Earlier payment of receivables
• Protection of supply chain by ensuring liquidity.
• Comfort of simple product, simple enrolment, owned bank system with web delivery, reputable and scalable service provider.
• Improved cash flow management and visibility of incoming payments.
• Lower total cost of finance.
• Finance on top of other WC facilities, as facility linked to specific buyer receivables.
• Removes credit risk costs and processing costs out of supply chain.
• Provides detailed MI and reporting

HSBC India also offers traditional Vendor / Purchase finance, facilitating customers to finance payables to their vendors against their credit lines to meet the working capital needs. SMEs can take benefit of such programs interfacing with the corporate buyers and understanding their channel finance tie up with the Bank. Benefits are similar to SIFS only key difference is, it is not paper-less                                                                                                                                               

HSBC India’s Distributor Finance Program (DFP) is another key product for dealers/ distributors of corporates who can’t access funds at a competitive rate, but through a corporate tie-up with HSBC India under the DFP program are able to meet their working capital needs at a competitive rate. The key benefits are: -

• Cheaper than traditional sources of working capital financing
• No transaction charges, ledger maintenance charges or account maintenance charges
• Minimal stamp duty requirements
• Minimal collateral requirements from Dealers/Channel Partners
• Easier assessment criteria and quick turnaround time.
• Additional facility to the Dealer/channel partner without disturbing existing banking arrangement

These products are backed by HSBC India’s internet based systems, which provide customers with adequate interface for online viewing and transactional purposes.

To sum up, HSBC India is fully geared to provide banking solutions to SMEs in India.

The author of the article is Head, Factoring and Open Account- Finance, The Hongkong and Shanghai Banking Corporation Limited (HSBC)