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CS Professional · IFSCA - Regulations, Listing and Compliances · Book-keeping, Accounting, Taxation and Financial Crime Compliance Services and TAS

Kaveri Exports Ltd uploads its invoice on a TAS platform in GIFT IFSC, and a financier agrees to pay it a discounted amount today against the invoice owed by a foreign buyer. Which feature of this arrangement is the defining characteristic of receivables financing?

The defining feature is that the financier advances funds against the receivable and is repaid from the buyer's payment on the due date. The seller gets early liquidity, the buyer's obligation continues, and the platform merely facilitates the transaction rather than becoming shareholder or guarantor.

  1. AThe financier acquires or advances funds against the receivable and is repaid from the buyer's payment on the due dateCorrect
  2. BThe financier becomes a shareholder of Kaveri Exports
  3. CThe buyer is relieved of its payment obligation
  4. DThe platform itself guarantees the buyer's payment by default

Explanation

In receivables financing or discounting, the seller gets early funds and the financier recovers from the buyer's payment at maturity. It does not create equity and does not release the buyer's obligation. A platform is an enabler and is not automatically a guarantor.

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