Jaipur-based 121 Finance has received the Reserve Bank of India’s Certificate of Registration (CoR) under the Registration of Factors (Reserve Bank) Regulations, 2022.

“We are the first non-banking finance company (NBFC) to convert from an Investment and Credit Company (ICC) to an NBFC-Factor,” said Ravi Modani, Founder & CEO, said 121 Finance.

An NBFC-Factor has to ensure financial assets in the factoring business constitute at least 50 per cent of its total assets and its income derived from factoring business is not less than 50 per cent of its gross income. It has to maintain a minimum Net Owned Fund (NOF) of ₹5 crore.

Factoring Act, 2011 defines the ‘Factoring Business’ as “the business of acquisition of receivables of assignor by accepting assignment of such receivables or financing, whether by way of making loans or advances or in any other manner against the security interest over any receivables”.

“As of now our company is fully capitalised by my family and friends. And we will be raising funds via the non-convertible debentures (NCD) route…Digital Factoring is the simplest, fastest, effectively lowest cost solution for working capital for any business, more so for micro, small and medium enterprises (MSMEs).

“In factoring, funds get churned pretty fast. For example, with a NOF of ₹15 crore, we did a disbursement of ₹207 crore last year…In FY2023, we want to do disbursements of ₹500 crore,” said Modani.

The NBFC isplanning to go live on the three Trade Receivables Discounting System (TReDS) -- Receivables Exchange of India Ltd (formed by NSE Strategic Investment Corporation Ltd and Small Industries Development Bank of India), Mynd Solutions Pvt Ltd and A. TREDS Ltd (joint venture of Axis Bank and Mjunction Services Ltd) -- as a lender.

TReDS is an electronic platform for facilitating the financing / discounting of trade receivables of Micro, Small and Medium Enterprises (MSMEs) through multiple financiers. These receivables can be due from corporates and other buyers, including Government Departments and Public Sector Undertakings (PSUs).

“Now that NBFC-Factor CoR is in place, we can become a member of all three TReDS platforms. We willenterinto co-lending tie-ups with Banks for financing MSMEs,” Modani said.