Credit Facilities

ARP / Factoring is essentially a credit service designed to improve cash flow. With ARP / Factoring DBS Bank agrees to buy your invoices on a continuing basis and offer the following services as part of the package:

• Make advances to you prior to the payment by your customers,
• Assume the credit risk that is the risk of loss resulting solely from the failure of your debtors to settle approved invoices because of financial difficulties; and
• Perform the book-keeping functions on the invoice purchased.

There are three basic types:

• Domestic ARP / Factoring - gives you immediate funds against your domestic accounts receivable. It also protects you against bad debts and releases you from the awesome tasks of sales ledgering and debt collection.
   
• Export ARP / Factoring - similar to domestic ARP / Factoring except that it covers overseas accounts receivable. It allows you to sell on open account basis without worrying about the risk of non-payment by customers due to their financial difficulties.
   
• Import ARP / Factoring - a credit line is set to let you buy from overseas suppliers on credit terms (open account) without the need for letters of credit. With our import ARP / Factoring, you can import beyond your bank's credit lines. And there are also
  • no collateral
  • no letter of credit charge
  • no interest charge

Recourse ARP / Factoring - we provide financing only. Should your customer fail to pay up you have to pay back the advance obtained from us.

Non-recourse ARP / Factoring - Apart from financing, we also provide credit cover against your customer. Should your customer fail to pay up we will bear the bad debt risk.

Under the above arrangement, your customers are not notified of the ARP / Factoring arrangement and they continue to make payment to your company.

Because we can turn your unpaid invoices into cash immediately. This means you can have instant access to your earnings. You don't have to wait for the usual 30, 60, 90,120 days or longer to get paid by your customers. You will, therefore, have a healthier cash flow position that will help to accelerate your company's growth.

Under our normal ARP / Factoring arrangement, you are paid upon collection or maturity depending on the types of arrangement. However, you can ask for an advance against the invoices factored to us before maturity or collection.

We can give you up to 90% of your invoice value - a larger line of financing than would be available under traditional source of finance.

Firstly, you get 100% protection against bad debts on all approved invoices should the debtors become financially insolvent and cannot pay up.

Secondly, the amount of money you can get from us automatically adjusts to your level of turnover. We therefore provide a growing business with a growing financial resource.

Thirdly, you rid yourself of the sales ledgering and credit control routines - which saves you time and money. Instead, we take over and help maintain all necessary records and shoulder the responsibility for collecting moneys due from customers.

Certainly not! We will not only keep you regularly informed of the position of your individual customer's account but will also consult you closely on collection procedures. In fact, as a result of our takeover of the collection function, you are kept better informed and have more and better control over your sales.

We understand and appreciate your concern over this matter. However, in practice and in the context of modern day business, your customers are unlikely to react adversely to your use ARP / Factoring.

Recognising the importance of your customer to you and to help foster a closer client-customer relationship, every courtesy and consideration will be given by.

Indeed, ARP / Factoring helps you to avoid the embarrassment of having to directly seek payment from your customers.

Just the opposite! ARP / Factoring is now accepted by customers as a normal, progressive business service. For new start up companies, ARP / Factoring is the financing of first resort!!

In fact ARP / Factoring is today perceived as a sign of your company's rapid growth.

ARP / Factoring is definitely a significant global trend. The worldwide ARP / Factoring volume is now over Euro 1,299 billion a year. The industry has grown phenomenally, stretching to over 60 countries around the world. More than 170,000 businesses are currently using ARP / Factoring to settle trade transactions with some six million customers worldwide.

The following prominent persons in Europe endorse ARP / Factoring:

Mr. Eddie George, former Governor of The Bank of England said "The professional financial service which the ARP / Factoring industry provides has proved its worth to industry and commerce now over many years. ARP / Factoring can greatly help to relieve the burden on management and to provide finance linked to the company's working capital needs".

Mr. Jacques Barrot, former Chairman of Finance Committee in the French Parliament said "ARP / Factoring greatly contributes to the reduction of average credit period taken by buyers".

(Source: The International Factoring Report published by Factors Chain International)

We will send you a statement of accounts once a month. This statement will show credits for debts purchased, the debit for credit notes issued and the amount of cash drawn.

None! That is the great advantage of ARP / Factoring.

Yes, that's why ARP / Factoring is so flexible.

Under non-recourse export ARP / Factoring agreement, we'll pay you 120 days after the due date of the invoice - even if your customer doesn't pay up. This way, you can plan your cash flow more accurately.

When you factor your accounts receivable to us, we remove them from your books, thereby reducing your total assets and consequently improve your ROA.

The true cost of ARP / Factoring is probably far less than you think. There are two types of cost - a service charge and a discount charge.

Service fee is levied based on the work involved in administering your sales ledger as well as for credit protection against bad debts. It is calculated as a percentage of the gross value of the invoices factored and is assessed on the following criteria:-

1. The gross sales volume
2. The number of customers
3. The number of invoices and credit notes
4. The degree of credit risk represented by the customer or the transaction
5. The country of export (for export ARP / Factoring)

Service fee ranges from 0.25% to 1% for domestic ARP / Factoring and 0.75% to 1.5% for export ARP / Factoring.

We charge you only for what you use, that is if you obtain advanced payments against the factored invoices before they are paid. The discount charge, which is calculated on a day-to-day basis on the actual period between such advances and the date of collection of the invoices factored, is computed on DBS Bank's Enterprise Financing Rate (EFR) plus basis.

When each invoice is eventually settled, customers make payment to DBS Bank or to our factoring correspondents (import factor) in the case of export ARP / Factoring. We will pay you the balance after deducting the advances and outstanding charges.

No. The correct way to evaluate ARP / Factoring is in terms of your company's growth. By enabling you to gain access to additional working capital, without restricting other forms of borrowings, ARP / Factoring provides a unique credit service. Furthermore, when you count the additional savings you will enjoy in terms of staff salaries, office overhead, bad debts and all the incidentals that go into keeping your sales ledger and chasing for payments on your invoices, you will see just how valuable ARP / Factoring really is.

Notwithstanding that we would like to do business with every company, we may have to decline those companies having the following characteristics:

1. Where the credit offered to customers is more that 180 days,
2. Where there are contra sale, consignment sale, or sale or return arrangements,
3. Where most of the sales are to associated companies,
4. Where the sales are to the public at large, and
5. Where sales are to countries not covered by our overseas correspondents.

Manufacturing and trading companies are the two main types of industries that benefited most from ARP / Factoring. However, recently we have tailored our facilities to cover the following industries as well:

1. Advertising companies
2. Solicitors and legal firms
3. Architect firms
4. Medical firms
5. Construction companies
6. Developers - finance the last 15% of sales and purchase agreements

Whether you should use credit insurance or ARP / Factoring will depend on your company's needs. Below is a comparison of the features of credit insurance and international ARP / Factoring:

We understand the subtleties that are so vital in providing ARP / Factoring facilities. Our rates are highly competitive. We are a member of the Factors Chain International - the world's largest international ARP / Factoring network. Therefore we cover more countries than anyone else in Singapore.

Just contact our Relationship Manager.